Sunday, February 08, 2009

Honeymoon is over

Dr. K. is right, the honeymoon is over.

And after Obama’s recent remarks at Williamsburg, VA, I’ll go so far as to say – It’s on like Donkey Kong.

After pretending for a couple of days to be bipartisan and receptive of criticism, Obama showed his true feelings about stimulus, revealing himself to be every bit the Keynesian we hoped he wasn’t:

So then you get the argument, well, this is not a stimulus bill, this is a spending bill. What do you think a stimulus is? (Laughter and applause.) That's the whole point. No, seriously. (Laughter.) That's the point.


No, that’s not what a stimulus is, or needs to be. One of the most widely circulated ideas on the right is a FICA tax suspension, which would simultaneously pay workers more while making their labor more affordable to their employers. Sounds better than waterparks and condoms to me.

Obama’s needling about tired old philosophies is rather ironic. The economic theories he criticizes may be slightly off at the margin, but they are the best working models of human behavior created, and they are the ideas responsible for the wealth of Western Civilization and the economic dominance of freer societies over more restricted ones.

Tax policy did not create the housing bubble, nor did a lack of government spending. Those are the issues at hand in the current bill, not regulatory issues (for which the Democrats share their portion of blame as well).

Obama’s naked Keynesianism, on the other hand, is a thoroughly debunked theory that bears absolutely no resemblance to reality. It has been intellectually discredited for half a century. If there is any “tired, old philosophy”, it is this red-headed stepchild of Keynesianism.

Keynes once expressed this sentiment:
“If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez faire to dig the notes up again . . . there need be no more unemployment”


This is essentially what Obama is advocating by his stimulus equals spending statement. I suspect the only reason the Democrats aren’t suggesting Keynes’ money-in-coal-mines scheme is that it would show people how much coal we really have in America, or at least irritate the coal miners’ labor union.

I am increasingly convinced that Obama is not merely wrong, or having values at odds with my own, but that the Light-Bringer is a little on the dim side. Only a childish ideologue would defend the wasteful spending in the stimulus bill. It is utterly indefensible. Obama’s Williamsburg speech amounted to a tantrum.

Many Republicans, including myself, were willing to compromise on meaningful spending, not wasteful spending. The GOP was basically sold on infrastructure spending. They weren’t, as Obama caricatures, wishing to rely only on tax cuts.

Not too long ago, a person could refinance his home to pay off higher interest credit card debt. A trillion bucks would make a heck of a socialized re-fi. But Obama’s plan isn’t to restructure America’s debt. The plan is the equivalent of taking the mortgage money and blowing a big chunk of it on blackjack and booze in Vegas.

Say “hi” to Elvis for me.

4 comments:

Anonymous said...

Hey Joe - what's the data on th cost-effectiveness on the gajillion dollars spent on Iraq to date?
Matt

Sockless Joe said...

1 - a (perceived) mistake does not make further mistakes less wrong.

2 - war is hardly the sort of thing you value on a financial basis, though clearly there are historical examples of this.

Anonymous said...

I just think the change in the dialogue in the deficit cuts both ways. The Iraq war has cost ~600 billion + and was started when the economy was more robust appearing. At that time we initiated war and tax cuts which is a novel approach - generating a significant cost burden for future generations. Now the economy has tanked and the solution (as I perceive it) from the Rep standpoint is more tax cuts while bristling at further spending because of the undue burden on our childrens generations. So my question for you is - from the Right - is there ever a time when is the time that tax cuts aren't the answer?

Also - while (perceived) mistakes do not make further mistakes less wrong, they certainly speak to the credibility of those who made them (on both sides of the aisle).

As for war not being something you value on a financial basis - you could certainly make the same argument about health care, human rights, or any of a myriad of other things we as a society spend money on. It shouldn't be treated as exempt/protected. Questions of cost-effectiveness should drive policy - both in military and civilian matters. The moment it is immune --> the free-market delivers us a boondoggle.
- Matt

Sockless Joe said...

So my question for you is - from the Right - is there ever a time when is the time that tax cuts aren't the answer?

First, there's been quite a bit of counter-cyclical damage control done already. The Federal Reserve Bank's balance sheet has grown to previously unthinkable levels (expanded by multiple trillions), the FDIC has been busy closing banks and insuring deposits (and expanding the level of insurance), the ad hoc insurance of money market funds, tax revenues are down at all levels of govt (sort of a natural built in tax cut), and Unemployment Insurance is being paid out (and extended by Uncle Sam), not to mention TARP-1 and the ad hoc interventions in the hundreds of billions.

Second, that is a reiteration of Obama's increasingly tired straw-man arugment -- most Repub congressmen are in favor of significant spending.

Third - There's been more than enough magical thinking on both sides to suggest that there is an answer. A lot of the recovery will just take time, and it could suck really bad.

As for war not being something you value on a financial basis - you could certainly make the same argument about health care, human rights, or any of a myriad of other things we as a society spend money on. It shouldn't be treated as exempt/protected.

That's a fair point, but an economic stimulus should only be judged on its ability to stimulate, i.e. on purely economic justifications.