Tuesday, May 17, 2011

The Economy Must Be Broken?!

It’s becoming a common refrain on the left: what’s wrong with the American economy? Why won’t it produce any jobs? We have economic growth, so why aren’t there any jobs? Booo hooo hooo. There must be something wrong with America! Booo hooo hooo! It can’t possibly be that our leftist economic theory is completely wrong?! No, the fault must lie elsewhere.

For two years now, leftists have become increasingly frustrated that the economy isn’t producing any jobs. When Obama took power, they got to implement a Keynesian orgy of spending that their economic theories told them should have resulted in a vast flood of new jobs. It was only a matter of time. But somehow, it hasn’t happened. How can this be?

The answer is pretty obvious to anyone not blinded by ideology. Increased taxation and regulation combined with uncertainty have discouraged companies from hiring. Combine this with unfair trade practices by foreign governments that make it unnaturally cheap to send jobs overseas, and you’ve got a situation where companies just aren’t going to create a lot of new jobs in the US.

But the left can’t stand to hear this because it blows holes in two of their cherished beliefs:

(1) Every dollar spent, no matter what the source, results in five dollars being added to the economy as a whole. This in turn results in jobs being created because every percentage point of economic growth produces 800,000 new jobs a year.

(2) It doesn’t matter what you do to an economy, growth will continue like normal after the shock of your action and the rules of theory one above will be obeyed. So tax away comrade, tax away!
Every leftist economist from moronic oracle (“moronacle”) Paul Krugman to malignant dwarf Robert Rubin to the self-deluded Economist prays at the alter of these theories. In fact, they need to believe this or else they couldn't justify raising taxes on people they don’t like, i.e. companies and “the rich.” Thus, they are stuck struggling for ways to explain Obama's economic failure while carefully denying the obvious -- that higher taxes and more regulations destroy job growth.

The latest theory they've pulled out of their nether-regions is that the link between economic growth and job creation no longer works as it has for thousands of years. In other words, economic growth no longer creates jobs. Naturally, they twist this into a call to tax non-job creators, i.e. corporations and the rich, so that the government can use the tax dollars to somehow create jobs. Apparently, Atlas Shrugged wasn’t fiction after all.

What these leftists are missing, of course, is that their two pillars are laughably stupid. Consider this:

Stupid Theory No. 1: The “Keynesian multiplier” theory works on the assumption that if you add money to an economy, the economy must grow larger. But it forgets to ask where the money comes from. Government spending must be pulled from the economy in the form of taxes before it can be spent. And if the multiplier is true, then every dollar pulled from the economy reduces the economy by $5. Thus, at best you break even -- five dollars out, five dollars in. But the government is an inefficient spender. hence, what you actually get is something like $5 out and $1.4 in. That means every dollar of stimulus spending results in $3.6 lost to the economy.

And if you think about it, this makes sense. Otherwise, we could just spend ourselves to prosperity. Indeed, if this worked, why stop at a trillion dollar stimulus? Wouldn’t a hundred trillion dollars be more responsible? Interestingly, even Keynesians don’t think that works. . . though they can’t explain why the trillion is supposed to work and the hundred trillion would fail. So why can't "brilliant" leftist economists understand this?

Stupid Theory No. 2: The second theory completely misunderstands human nature. Reality is simple: people work because it benefits them. If you tax their earnings/profits, they will work less because it becomes less worthwhile to work, invest or take risks. The same is true of regulations. If you make something harder/more costly to produce, people will produce less of it. Thus, it makes no sense whatsoever to believe that people will continue as if nothing has changed when you increase taxes or regulations -- indeed, if I started punching you every time you went to work, why would this bother you the first couple times but not the 1,000 times after that? Therefore, pillar two is utter nonsense.

What’s more, the Democrats don’t understand the concept of uncertainty. Even where Obama has left taxes as they were or not imposed some regulation, he’s still run around flapping his gums about how he plans to raise taxes or impose regulations as soon as he feels he can. That makes future profits and costs uncertain and causes people to stop spending, investing or working until they get clarity.
The left refuses to accept the obvious because that would discredit their economic theories and interfere with their desire to punish those they don’t like. Indeed, their economic theory makes no sense logically nor has it ever worked in practice, but it gives them the excuse they need to exercise a little self-righteous spite. Thus, moronacles like Krugman and The Economist would rather disgrace themselves with ridiculous theories about the economy having mysteriously failed than admit that the fundamental tenets of their beliefs are completely and utterly wrong. That must suck.

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