Dear Mr. Colmes,

I appreciate what Alan Colmes wrote in his piece in the Wall Street Journal yesterday, How Democrats Made America Exceptional.

I disagree with it, but I appreciate it for a couple of reasons.

First, I appreciate it when someone supports their position with more than “because I don’t like the other side and you just can’t change my mind, so don’t even try!” It allows me to see if there’s something I’m missing and maybe, possibly have a start of productive conversation.

Second, I appreciate that a younger me may have been swayed by some of what Colmes wrote.

There’s much to debate in what Colmes’ piece. I thought this would be a good place to start:

 It was Democrats who fought to extend unemployment benefits during this difficult time. For every dollar in these benefits, the return is $1.64.

In the sentence previous to this, Colmes wrote about the multiplier effect. I’ll assume his ‘return of $1.64’ is a sloppy way to repeat multiplier effect without using the same words.

Still, $1.64 for a multiplier effect is heady.

If Colmes believe this to be the case, I see why he might support expansion of government policies.

If so, he believes government spending flows through the economy creating more economic activity as the recipient of the dollar spends it at the grocer, the grocer spends it to buy more goods, the supplier uses it to pay his workers, and so on.

I remember learning about the multiplier effect in my Econ 101 course and being impressed with it.

I also remember realizing, sometime later, that the magical government mystery dollar had to come from somewhere to begin with: taxes.

It could either be taxed now, in which case that dollar isn’t so magical. The taxpayer could have spent it and got it flowing, no?

Or, if those pesky taxpayers are just being stubborn and not investing their money when I think they should, the government spending dollar could be borrowed against future taxes. Which seems even less magical and strangely inconsistent coming from the crowd who uses future generations to morally justify many other actions.

Well, some of them say, we expect the economy to be humming again by then and our grandchildren won’t notice that teeny extra debt we passed on to them.

But, I wonder if Colmes knows this. If anyone knows him, please ask him for me. Thanks.

Update: Thanks to the comment from Sonic Charmer that made me realize I wasn’t clear on my point. Believing the multiplier is greater than 1 means ignoring, or greatly discounting, where that dollar came from.

The way I understand it, Keynesian folks believe that it’s okay to borrow a dollar from the future in a slack economy to get give GDP a boost now and repay that dollar when the economy is humming. Even in that scenario, the multiplier effect only applies to the current period. The multiplier over time, now and in the future when the borrowed dollar is paid back, is less than one because you have to account for repaying the debt.

Let’s assume that Keynesian logic is good for a short-term GDP boost. That’s still not sound reasoning for someone like Colmes to support ever expanding government on the mistaken belief that government spending is good for the economy because it forever and always has a multiplier greater than one. It does not. That ignores the day when those dollars will be repaid. That’s where Greece is now.

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3 thoughts on “Dear Mr. Colmes,

  1. There’s a simpler critique which is that the ‘multiplier’ being bigger than 1 is bogus. And Colmes has no solid reason to assert otherwise. He may as well just be making up a number and shoving it into his argument to make it sound sciencey.

  2. “That ignores the day when those dollars will be repaid.”

    Exactly!!! And that’s when the “great” Keynesian multiplier becomes the even greater Keynesian divisor. If people hadn’t become so accustomed to the entitlements and luxuries afforded by this false expansion of the economy, riding the roller coaster back down would be a quick and relatively painless event. However, people don’t want to give up the goodies that were provided by the illusion of wealth rather than the creation of wealth and so they implore the Keynesians to push the roller coaster to even greater heights until their is no more track and the wheels come off.

    The Keynesians make the mistake of borrowing from the future so that they can spend what they have not yet saved hoping that that savings will magically appear from nowhere. But the people always want MORE and the Keynesians insist on more borrowing (or more taxing of the evil 1%) and more spending in order to keep their constituents’ votes rather than telling them the truth and cutting off the gravy train.

    Sure, Keynesian economics sounds great when you ignore the fact that those dollars that the government uses to stimulate the economy came largely from the very people who, as a result of the confiscation of their wealth, have less capital with which to create real, lasting jobs.

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