Pride and Stimulus

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When people learn that you are an economist, they often want you to predict which way the economy is going. There seem to be more than the usual number of calls for such predictions lately. But an economist should be more aware than others are of how hazardous such predictions can be.

One reason is that what happens in the economy is affected by what politicians do in Washington— and who can predict what politicians will do?

However, let me go out on a limb, and try to predict what politicians will not do.

What would probably get the economy recovering fastest and most completely would be for the President of the United States and Congressional leaders to shut up and stop meddling with the economy. But it is virtually impossible that they will do that.

Think about telling all the millions of people who have lost their jobs, their homes or their businesses: “I really messed you up but, hey, nobody’s perfect. So I’m going to leave things alone now.” In fact, that would be hard even to tell yourself.

If the stimulus isn’t working, the true believers have to believe that it is only because it hasn’t been tried long enough, or with enough money being spent.

There are always calls for the government to “do something” when things are going bad. Those who make such calls have almost never bothered to check out what actually happens when the government does something, as compared to what happens when the government does nothing.

It is not just free market economists who think the government can make a mess bigger with its interventions. It was none other than Karl Marx who wrote to his colleague Engels that “crackbrained meddling by the authorities” can “aggravate an existing crisis.”

The history of the United States is full of evidence on the negative effects of government intervention. For the first 150 years of this country’s existence, the federal government did not think it was its business to intervene when the economy turned down.

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  • Barry Cooper

    Phase one, it seems to me, was largely engineered by the same people. People like the Rockefellers benefited from the stock inflation, then sold at the top. The following deflation created a firesale, enabling them to gobble up assets at a fraction of their worth. Given that such interests created and controlled the Fed, it's hard to see that pattern as accidental.

    Phase two, it seems to me, was "never let a crisis go to waste". Absent the economic devastation wrought, our nation never would have accepted Socialist proposals such as Social Security.

    The whole thing makes me sick.

  • LisaH

    I'm halfway through 'The Vision of the Anointed' and it's turning out to be another one of those epiphany moments where so much of what I took for granted to be true turns out to be fraud and phony. It's hard to believe this book was published in 1995–the current administration's failed economic policies are foretold here.