Tuesday, August 10, 2010

Obamanomics: no fix for America’s panes
Keynesian economic theory losses to reality

WASHINGTON, DC—Prior to last Friday’s numbers dump, the chief theoretician on Team Obama, Christina Romer, announced her retirement from public service to rejoin the private sector at Berkley where theory reigns supreme, uninterrupted by pesky real world circumstances.

The Washington Examiner and Larry Kudlow both wrote pieces yesterday proclaiming precisely this, citing a slew of bad economic numbers: the 9.5 percent jobless rate, anemic 2.4 percent growth, the addition of more discouraged workers, and a weak outlook for the next three quarters.

How could this be? Ms. Romer’s grand thesis on the miraculousness of the stimulus boasted holding unemployment under 8 percent and growing the economy at an astounding rate by injecting massive government money into the economy. Yet, America is in the exact same position Ms. Romer said it would be in if the stimulus wasn’t passed.

This is the broken window fallacy on full display: the theory the smashes Keynesian window dressing. Simply put, it states that government spending improves the economy by creating jobs. There’s only one wrinkle in the theory—government doesn’t produce anything that makes money, so the money has to come from taxpayers. In other words, the government has to confiscate money from the private sector to inject money into the private sector.

The Soviet Union tried this. Japan has tried this. Cuba has tried this.  And America has tried this about three times. Theory: 0, Reality: 6.

-- Owen E. Richason IV
Chief Editor, Killswitch Politick

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