There is nothing like an old-fashioned depression to bring out the crank theories. John Maynard Keynes’ General Theory, written during the Great Depression, put crankdom into "sophisticated" mathematical models, while Paul Krugman, a Keynes disciple, insists that the government printing money willy-nilly poses no economic threat, since it will "stimulate spending." However, the "You Can’t Make Up This Stuff" Award this week goes to Krugman’s employer, the New York Times, which has an April 8 editorial on how to kill jobs.
Actually, the editorial is entitled "Job Creation Basics," and it supposedly contains instructions on how to create jobs, but the formula for success given by the "Newspaper of Record" reads more like a manual on how to keep unemployment high and how to keep entrepreneurs from finding new areas of production. Yes, I know that readers are shocked to find that the newspaper that employs Krugman might have an editorial filled with economic fallacies, but that’s just the way it is.
Without further ado, let me take apart this editorial. Not surprisingly, the editorial begins with a quote from President Barack Obama:
President Obama recently noted that, by itself, government cannot replace the 8.2 million jobs lost over the past two years. What government can do, he said, is "help to create the conditions" for renewed hiring.
As I read those words, I admit to feeling a bit of excitement. Was the NYT going to make an about face, endorsing policies that might permit entrepreneurs to work without the government looking over their shoulders? Would the NYT endorse sound money, which is so vital to economic growth and stability? Would the NYT actually call for government to stop its destructive spending and debt spree and come to grips with all the economic destruction that is going on?
Sigh. My small hopes immediately were dashed with the next paragraph:
We couldn’t agree more. The question is whether Congress will do what is needed. The job situation is dire. But Republicans have apparently decided that grandstanding about the deficit is more important.
Well, Goldstein was not available to mess up the world and deceive the good people of Oceania, so I guess that the dastardly Republicans were the next best thing. Given that Obama has an overwhelming Democratic Congress, not to mention an army of bureaucrats and executive powers that Stalin would have loved, one should wonder why he or anyone at the NYT would worry about what Republicans are going to do, but Goldstein always lurks nearby, I suppose.
Now, I really wish the Republicans would take the deficit seriously, and certainly I wish that they had done so when they were running the show in Washington. Instead, they started wars, spent money, and helped give us this current depression. Thanks, guys.
So, I cannot exactly blame the NYT editorial writers if the sudden concern the Republicans have for the deficit were to make them a bit cynical. However, maybe someone needs to be raising the roof, not just grandstanding, when it comes to these destructive two-trillion-dollar deficits.
Unfortunately, while the Republicans grandstand, the NYT and the Democrats want us to play the "Let’s Pretend We Have Lots and Lots of Free Money" game, forgetting that this spending spree is the very reason that the economy is tanking. Now, if we wish to turn around this mess, we do it by getting the fiscal house in order, building up our own savings, taking the harsh-but-temporary medicine, and actually creating the conditions (to use Obama’s phrase) that will encourage production and the building of a real economy.
As I said before, one would hope that the NYT and Obama had such things in mind but, alas, the real problem, according to these people is that the government is not spending enough money. Read on:
The economy added 162,000 jobs in March, a welcome gain after more than two years of nearly uninterrupted losses. But unemployment remained stuck at 9.7 percent. And without more government support, it is unlikely to fall much anytime soon.
Most of March’s job gains were temporary positions with the Census Bureau or in the private sector. The Census Bureau will keep hiring for a while, but the jobs will end by the fall. Private-sector temporary jobs won’t become permanent unless employers see steady economic growth, which is far from assured as stimulus spending fades later this year.
Perhaps most destabilizing, upcoming budget cuts by recession-battered states will lead to more job losses.
As states try to close their deficits with tax increases, consumers cut back on their spending, which harms businesses and hiring. As states cut spending, there is less business for private-sector contractors and more layoffs of government employees. Already in March, state and local governments shed 9,000 jobs.
That is why it is so critical to extend unemployment benefits through the end of the year and get more aid to states. Jobless benefits are the most powerful way to bolster waning demand during times of high unemployment. State aid also flows quickly to contractors, employees and beneficiaries, whose spending then supports jobs.
Say what?!? I need to get this one straight. The way to "create jobs" is to give unemployed people a lot of money and then they will spend it and MAGICALLY CREATE JOBS. Furthermore, state governments are not able to take enough in taxes to spend even more, and if those governments slow their spending, MORE JOBS WILL BE LOST.
One only can wonder if these people can perform even simple logic. Why are states unable to take in more taxes? It is because the economy is bad, yet according to the NYT, it is state spending that actually "creates jobs." Now, I must admit that they actually get it partially right when they acknowledge that raising taxes will have a dampening economic effect, but, again, we are speaking of something that is so obvious that even someone from Paul Krugman’s employer can understand it.
However, that piece of partial logic is lost in the greater display of Harry Potter Economics, for the NYT has a solution that even Harry could not create: borrow and print money and pretend the government is creating real wealth instead of destroying it. Think I am kidding? Read on:
The House recently passed a one-month extension of expiring federal unemployment benefits. Before the Senate left town for spring break, Tom Coburn, a Republican of Oklahoma, blocked the extension, saying that it should be paid for with other budget cuts.
The House and Senate have already passed bills with a more generous extension and increased aid to the states. But they have been slow to finalize legislation and there are worrying signs that Mr. Coburn’s arguments are gaining ground throughout his caucus.
Make no mistake, the deficit is a serious problem that must be addressed in the medium term. The economy needs to be bolstered now.
Perhaps the editorial should be renamed "Juvenile Economics 101," as what the writer really is saying is that while the fiscal train wreck is going to happen unless we collar the deficit, for the time being, let’s party on as though everything were just fine. If we follow the editorial’s logic, we get the following: Yeah, we are headed for disaster if we continue down this track, BUT WE WANT JOBS NOW! So, anyone who tries to point out the danger, like Tom Coburn, is demonized in the pages of the "Newspaper of Record."
However, lest one think that it will take only another extension of unemployment benefits to "cure" our economy, it will take even more welfare than that, as the writer explains:
Congress also must increase aid to small business. The Treasury should also redeploy bank bailout money for small business loans. And legislation is also needed to reinforce spending on infrastructure and clean energy, and create public jobs, especially summer youth jobs. Teen unemployment is currently 26 percent.
It is hard to know where to begin here, and for most readers of this page, I think the folly of the preceding paragraph is obvious. We have people who apparently believe that printing and borrowing money is the answer to our problems, and that all we have to do is send out a few more checks, hire teenagers to do nothing, and subsidize production of Al Gore’s investments (which never could make a profit in a free market), and out of that will come prosperity.
But, there even is more, should one think that there will be any portion of this editorial that expresses economic sanity:
Mr. Obama is right that the government needs to do more to create the conditions for more hiring. But being right about the policy isn’t enough. He needs to get the politics right. Americans are nervous about the deficit, and so far the Republicans are carrying the debate.
The president needs to make the case to the public that without more emergency aid to jobless workers and hard-pressed states, unemployment will remain unacceptably high. And that will be bad news for all Americans.
Yes, he needs to get the "politics right." He needs to run the printing presses, borrow until the U.S. Government ultimately defaults on the debt, and then print more money.
Lest anyone wonder why this economy is headed for the trash bin of history, just read the words of the "intellectuals" and the journalists, not to mention the economists that appear on the television news shows. The NYT has a story which insists we are in a recovery. Like Kevin Bacon’s character at the end of Animal House who screams, "All is Well!!" the "experts" and prophets of the Regime tell us we have nothing to fear.
All of this reminds me of what transpires in I Kings 22, in which false prophets give bad advice to Ahab before battle. The one prophet who tells the truth is locked up in jail, but he is correct, and Ahab is killed and the army is routed.
As I see it, people like Krugman and the NYT are the false prophets but, face it, the politicians want to be deceived, anyway. So, why listen to the Austrians when a Nobel Prize winner and the "Newspaper of Record" are telling the president that he can be a hero by borrowing and spending? Unfortunately, the consequences of this foolish advice soon enough will be known to everyone else just as the Austrians know it now.
William L. Anderson, Ph.D. [send him mail], teaches economics at Frostburg State University in Maryland, and is an adjunct scholar of the Ludwig von Mises Institute. He also is a consultant with American Economic Services. Visit his blog.