Sunday, August 7, 2011

"Obama and the Democrats have to ... make government work", Part 1

A very recent article in Salon proclaimed that Obama needed to "make the government work" in order to create new jobs. The exact job-creating mechanism proposed by the author Joan Walsh is, as could be expected, is solidly liberal and includes three major paths to prosperity:
1. More government spending
2. More government spending
3. More government spending.

I am not sure if anyone following the current discussion on job creation is surprised by the breath-taking diversity of proposals by Joan. She surely gave a lot of thought to the current economic situation, and worked out a very serious plan to cut unemployment. It clearly demonstrates that liberals are ready to deal with a serious crisis of confidence of the American people towards the bankrupt American government. After all, what is more likely to convince our struggling nation that liberals take federal debt seriously - than spending another gazillion dollars on some community bulding project. "If only Obama spent more on stimulus", whisper some economists - "we would have a perfect economy by now".

Apparently, the idea is that when the government spends another trillion dollars, the economy rebounds due to an increase in the never-defined "demand". Of course, it's rare that anyone of those famed economist explain where that trillion dollars is supposed to come from - apparently it just magically appears in the hands of the government (the Santa Claus school of economics). An economist of the Austrian school though would contend that the government must first withdraw that trillion dollars from the economy before it can spend it - so in the end, there is no net stimulus to the economy - there is only transfer of money from private economy through IRS and into the hands of the government clients. The other two options for the government to get a hold of a trillion dollars are equally troublesome -  government borrowing from private investors (which also means less funds would be available to the private businesses) or money printing (which means the government robs anyone who holds cash).

In short, the argument between the Austrians and the American Santa Claus liberals reminds me of a rather similar discussion between two characters in a famous Russian cartoon.

Feodor: We are broke, we need the money.
Dog Sharik: How about we sell something we don't need?
Feodor: In order to sell something we don't need, we have to buy something we don't need - and we can't afford to buy anything because we don't have the money.

The position of a liberal economist is virtually indistinguishable from what Sharik proposed - but then, Sharik was a very nice friendly character - which is not something you can say about professional liberals. In fact, if you disagree with a liberal journalist/economist/politician on this subject - he is likely to call you a "terrorist", a "jihadist", "Hezballah", "Taliban" - and the only thing that is stopping him from biting you is his cowardice.

1 comment:

Trestin said...

I fear that they are going to follow the classic Keynesian path and seek try to stimulate the economy with a major war.