The Free Thinker

The Keynesian Fallacy

"Debt alarm over stimulus spending":

The enormous public cost of fighting the global crisis is haunting governments and unnerving investors.

Even as President Barack Obama declared Tuesday that the United States must continue to “spend our way out of this recession,” international ratings agencies sent shivers through markets with warnings that spiralling budget deficits and soaring debt levels are putting sovereign ratings at risk.

Analysts do not expect a return to fiscal stability soon, and some countries continue to rely on stimulus spending to support fragile economies.

"To support fragile economies."  The Keynesian fallacy has become embedded in the language.  We passed the stimulus, unemployment rose, and yes the economy recovers a bit, as it always tends to do with or without "support," but weakly and not before sinking further.  You'd hope this experience might induce journalists to rephrase a bit, to write, say, that "some countries continue to burden fragile economies by increasing spending."  But the Keynesian fallacy is too embedded in the language.

It should be noted that the only real empirical "success" of Keynesianism is that military spending does seem to raise GDP.  But there's no need to appeal to a Keynesian model to explain that.  Suppose the government spends $X in a purely wasteful manner: will you work more or less?  Probably more, because since the government, now or later, is going to take some more of your money to pay for the $X expense, you're prospectively poorer, so your marginal value of money relative to labor rises and you work more.  War makes us poorer but raises GDP because we have to produce more to make up for what we destroyed.  Keynesian macro is theoretically flawed and has scant if any empirical support.  But how do we purge it from casual journalistic language?

"McCain Not Promising to Support Palin"

(Dec. 14) - Sen. John McCain said Sunday he would not necessarily support his former running mate if she chose to run for president.

 

Speaking to ABC's "This Week," McCain was asked whether Alaska Gov. Sarah Palin could count on his support.

 

"I can't say something like that. We've got some great other young governors. I think you're going to see the governors assume a greater leadership role in our Republican Party," he said.

 

He then mentioned governors Tim Pawlenty of Minnesota and Jon Huntsman of Utah.

 

McCain said he has "the greatest appreciation for Gov. Palin and her family, and it was a great joy to know them."

 

"She invigorated our campaign" against Barack Obama for the presidency, he said.

 

McCain was pressed on why he can't promise support for the woman who, just months ago, he named as the second best person to lead the nation.

What a ridiculous news story!  Can you imagine the converse: McCain promising to support a candidacy that may never happen, four years in advance?  But then, you can't really blame reporters, who have to generate endless streams of newsprint without having the specialized knowledge to write anything really interesting.  Reporting is such a miserable job you can almost forgive them for livening up their jobs by tricking the voters into electing the least-qualified president ever, a man who is a safe bet to provide us with four years of incompetence and scandal.  A foretaste of the Obama administration:

Barack Obama insists that he and his staff were not involved in the alleged schemes Illinois Gov. Rod Blagojevich cooked up to sell off the president-elect's vacant Senate seat. 

But the timeline of activity outlined in the FBI's 76-page complaint against Blagojevich suggests Obama's team was aware that his home-state governor was playing political hardball in the weeks before his arrest.

That's because shortly after Blagojevich allegedly told his advisers, in an expletive-laced conference call, that he would not appoint Obama's pick to the Senate absent huge favors in return, Obama's apparent pick promptly dropped out of the running for the Senate and joined the new White House staff. 

"Reading between the lines ... clearly somebody from (Obama's) operation did have a conversation with Blagojevich," Democratic strategist Bob Beckel told FOX News. He added that Obama's representative evidently wasn't trying to cut a deal since Blagojevich indicated he was "getting nothing out of the Obama people."