Each generation needs to learn the lesson firsthand that Keynesian economics doesn’t work. I’m trying to think back to my younger self to remember what was so seductive about believing the government could and should fix everything.
It seemed so simple. A hole in the road? Fill it. The poor? Give them money. You see a problem, you fix it.
I was too young to know that my “fix it” mentality had been tried before and names for it. Like most people today, I heard “Keynesian”, but didn’t know what it meant. I was too young to know that there were reasons, very subtle and unintuitive reasons, but real reasons why “fixing it” didn’t work. Why it failed. Why, the fixes that were born of good intentions, ended up causing damage to the very things they were meant to fix.
I eventually figured out that filling a hole in the road didn’t help if I didn’t fix what caused the hole in the first place. John Maynard Keynes likes to dump asphalt into holes. “Supply siders” as the media calls us, because calling us supporters of the Austrian school of economics might make us sound legitimate, like to fix what caused the hole.
Read it here.
Stossel’s on the mark in criticizing the often quoted $1 million lifetime earnings bonus from a college degree. It’s an example of a misleading statistic that’s taken as conventional wisdom. Much of the difference in earnings derives from individual characteristics rather than the college degree.
Consider the woman Stossel featured in his article, Rachele, who paid $24k/year for a human development degree based on, “I was told just to take out the loans and get the degree because when you graduate you’re going to be able to get that good job.” Did she research the job market for someone with such a degree? I’m guessing that’s what people who earn the million dollar lifetime bonus would do.
Rush said it. Read the full transcript here. Read Leonard Pitts’s retribute here.
Pitts’s main point is that Rush’s publicity stunt ought not be ignored because of what it says about Rush and anyone who defends him. What it says, according to Pitts, is that hoping the President fails is hoping the country fails and is therefore disloyal to the country.
I disagree with Pitts. Disloyalty to the country is hoping the Constitution fails. Could a German hope for Hitler’s failure and a bright future for Germany at the same time? To be clear, I’m comparing no one to Hitler, I offer that as an extreme, but plausible, example where a citizen could hope for a failure of a leader without hoping for the failure of the country.
The unfortunate outcome of Rush’s remarks is captured in Pitts’s commentary: hurt feelings and reflexive attempts to defend. Tragically, the dialogue rarely goes past that.
The more interesting question to me is buried in Rush’s transcript,
…what is unfair about my saying I hope liberalism fails? Liberalism is our problem. Liberalism is what’s gotten us dangerously close to the precipice here. Why do I want more of it?
I wonder what Pitts thinks of this?
The evening news reported on potential increases in Federal and several state gas taxes. The report did not clearly report the reason for the increases and finished with the the myth that increased taxes will “create new jobs.” This quality of reporting makes it difficult to watch TV news. I know it takes a lot of time to make yourself look good for the cameras, but don’t they have any off camera staff that can make a news piece intelligent?
According to this Reuters article, driving declined in 2008 reducing demand for gas and reducing gas tax revenue. This is important information that may not be well received by the public because it makes the government look like like the “evil oil producers”, not wanting to lose a drop of revenue. One person quoted on the evening news said the Federal gas tax had not increased from it’s level of 18 cents per gallon since 1993. It didn’t have to to. Revenues increased along with demand. Now that demand has gone down, they still want the revenue.
Also, it’s not clear what the revenue is needed for. If driving is down then so would be the need for new roads, perhaps even the need for maintenance. These are at least good questions to ask.
Finally, this myth of creating new jobs is a crutch of bad reporting. If the government collects more money in gas tax, that’s less money I can spend elsewhere. These new jobs displace jobs that would have been supported by spending the money elsewhere. What’s worse, if new roads and road maintenance isn’t needed because we’re driving less then these jobs may produce less value than the displaced jobs.
This interesting question was asked by the Sir John Templeton Foundation and answered by thirteen people of different viewpoints.
Five answered no (per the titles of their essays found at the site), without qualification. Two answered yes without qualification. Two answered “it all depends.” The remaining four answered yes with some qualifications.
I have not read all yet. So far, I agree with Tyler Cowen’s (an author of one of my favorite blogs, Marginal Revolution). Of the essay’s I’ve read that I disagree with, Robert Reich’s provides the most interesting arguments. I would love to see what Cowen thinks of it. I will write more about it in the future.