Showing posts with label Keynesian economics. Show all posts
Showing posts with label Keynesian economics. Show all posts

Friday, September 2, 2011

Do the Rich and Poor a Favor. Back Off

Last week, when a rumor leaked out that the Fed is plotting new measures to stimulate the economy, perhaps a QE3, gold prices spiked. QE refers to quantitative easing, the purchase of American government bonds by our own Federal Reserve Bank, effectively injecting money into the economy, or what we call "printing money."

The Street reported,

Gold prices popped Tuesday after Chicago Federal Reserve President Charles Evans said further measures to stimulate the economy could be necessary. The rally continued in after-hours trading after the Fed's latest minutes from the Federal Open Market Committee meeting in August showed a growing number of presidents calling for more stimulus.

Every time the Fed plays this card, the economy actually slows. Alan Reynolds gave us a detailed account of this in his Wall Street Journal op-ed, "The Fed vs. the Recovery." He concludes, "In the end, quantitative easing turned out to be an anti-stimulus which stimulated nothing but the cost of living and the cost of production. Good riddance."

Whenever President Obama dives into the economy to make things right, rather than stimulating, he depresses the economy. Instead of inspiring hope and confidence, he creates uncertainly and stagnation.

In light of the aggressively interventionist liberal government that we have suffer in these three years of the Obama presidency, Gary Becker compares market imperfections with the government imperfects that go with government attempts to perfect the market ("The Great Recession and Government Failure"). He finds that "market failure" is like nothing compared to the more predictable "government failure." He writes, "This recession might well have been a deep one even with good government policies, but "government failure" added greatly to its length and severity, including its continuation to the present."

The Journal's editorial today ("In Government We Mistrust"), reflect on this same problem of liberal, "progressive," government intervention and the predictable damage it does. They cites a Gallup poll that has tracked public confidence in government since the Eisenhower presidency. "Every time Democrats attempt to govern the country from the ideological left, they damage government's reputation and status." It's a demonstrable historical pattern. They supply the charts.

For another look at the unflattering comparison between Obama and the Gipper (he has invited it), read Stephen Moore's "Obamanomics vs. Reaganomics," also in the WSJ.

But it is not just the economic well-being of the population as whole that liberals damage. They hurt the people whom they say they are most concerned to help: the poor. I write about this in my Worldmag column from a month ago, "Save the Poor from their 'Friends'."

The poor in America (whoever exactly that is) have many friends in Washington D.C. But that is part of their problem. When your friends are powerful and aggressively well-intentioned but unwise, you don’t need enemies.

They tried to help unwed mothers. They gave them AFDC, and swelled their ranks, and made the condition permanent. The Evangelical left is passionately wed to this tradition of "help." I describe Jim Wallis's opposition to welfare reform in 1996 and now his "Circle of Protection" for the poor against any rollback of the welfare state.

It brings to mind Ronald Reagan’s quip, “The nine most terrifying words in the English language are: ‘I’m from the government and I’m here to help.’”

Saturday, September 12, 2009

Keynesian Economics and Government Math

If you are suspicious of the numbers Democrats throw around when promising us heaven on earth, you are not alone. Some patriotic citizen out there, equally suspicious, put pencil to paper on the Cash for Clunkers program hailed by all and sundry as such a rousing example of the beneficence of Keynesian pump-priming, to see just how marvelous a thing it was.

Cash for Clunkers is a tiny program by this administration's standards, so the following analysis, suitably scaled up for the other government spending horror shows coming this season, should serve to clarify our situation, vis-a-vis our government masters.

The two main rationales for the program were 1) replacing gas guzzlers with more efficient cars, while 2) goosing sales and thereby providing stimulus to the economy. My, how they must imagine old John Maynard beaming down from heaven at his acolytes' clever combination of his economic theory with the tenets of the Church of Green. Let's take a look:
A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline.
A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year.

So, the average "Cash for Clunkers" transaction will reduce US gasoline consumption by 320 gallons per year.

They claim 700,000 vehicles – so that's 224 million gallons / year.

That equates to a bit over 5 million barrels of oil.

5 million barrels of oil is about ¼ of one day's US consumption.

And, 5 million barrels of oil costs about $350 million dollars at $70/bbl.

So, in brilliant Keynesian fashion, the government (that is, you and I) spent $3 billion to save $350 million.

Hey, if you're going to save the earth, you have to spend some money. The extra $2.65 billion is what the carbon dioxide not spewed into the atmosphere by those clunkers cost us.

Now let's see what they can do with regulating and taxing the entire carbon-based energy sector. Should be a bargain along the lines shown above.