Paul Krugman argues in the New York Times that we need more government action, more stimulus and also that there is no structural problem associated with high unemployment, rather it is a lack of demand which must be created by more government stimulus.
Ah, perhaps prayer is the answer
It is hard to argue with a Nobel Laureate, especially when you struggled with Economics 101, but I am looking at the cash for clunkers program and asking what was the result? People bought cars to get the cash and then stopped buying cars. Then we have the tax credit for buying a house; same deal a rush to get the cash and then a decline in buying homes. And how many of the people using the programs would have made the purchase in any case? I don’t see we stimulated much of anything other than an increase in the federal deficit. I received a $1500 tax credit because I put high efficient central air in my home of 35 years. I didn’t change an existing system mind you I never had central air before. I would have installed it in any case but I am happy to take the $1500.
Economists are supposed to be scientists of a sort (I guess) looking at data past and present and the interaction between elements of a vast complex system and coming not only to conclusions, but predictions and strategies to manipulate that system. The trouble is that they can’t agree on anything, more government, less government, supply side, government stimulus, more taxes, less taxes. All this leads me to the conclusion that economists are really meteorologists in disguise. Neither is able to predict much of anything beyond looking out the window each morning and making a prediction for the next few hours. The difference is that when the meteorologist is wrong we get wet, when the economists is wrong we get screwed…and taxed. OK, so there is no difference.
The past isn’t much help to the weatherman, but it should provide some lessons for the economists as should the fact that people are people and they react to preserve their self-interest in many different ways none of which fit into a predictive model.
“Now, gentleman, we have tried spending money. We are spending more than we have ever spent before and it does not work . . . I say after eight years of this administration we have just as much unemployment as when we started . . . and an enormous debt, to boot.” Henry Morgenthau to the House Ways and Means Committee in April 1939
Which academic center of our universe should be put our faith in, Harvard, Chicago, Stanford, Princeton or perhaps the school of hard knocks?
I have to admit a certain bias, I don’t like debt, mine or anyone else’s and I don’t like high taxes to pay off debt, especially someone else’s debt. I also don’t like the idea that the solution to lowering debt is higher taxes rather than lower spending. I find that similar to the child who demands a higher allowance so he can download more songs to the iPhone (I bet at my age you thought I was going to say something like buy more candy) rather than download fewer songs and live within his allowance.
All I know for sure is that we don’t know and neither does Paul Krugman or any other economist it appears. I look out the window and see a sunny day…for now.
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