Today’s N&O features an article from the Washington Post Writers Group that is filled with ignorance and fallacies. The article attempts to discredit House Speaker John Boehner’s comments regarding government stimulus spending and economic growth. The authors of the article attempt to claim that Boehner’s comments are mere articles of ideological faith, and not grounded in economic reality.
In so doing, however, it is the authors that cling to a discredited “vulgar Keynesian” ideology devoid of sound economic principles.
Specifically, they claim that Boehner’s statement about the federal stimulus hurting the economy and hampering “private-sector job creation in America” is “simply false.” What is their irrefutable evidence that this claim is “false”?
Reasonable economists can disagree about the effectiveness of the stimulus spending and whether it was worth the drag of the additional debt, but no reasonable economist argues that it hurt the economy in the short term.
The Congressional Budget Office estimates the stimulus added, on average, about 1 percentage point annually to economic growth and reduced the unemployment rate by half a point between 2009 and 2011. And that’s the low-end estimate. Economists Alan Blinder and Mark Zandi estimated in a July 2010 paper that without the stimulus spending, the unemployment rate would be 1.5 percentage points higher.
Of course, by “reasonable economists” they actually mean mainstream government-funded economists who blindly adhere to Keynesian orthodoxy. They cite as proof positive of the stimulus’ benefits a CBO report and a paper by two Keynesian economists stating that the economy would be worse off if not for the government stimulus. I wrote before about how the CBO study assumes their conclusion before even examining the data. In other words, the CBO workers already assume that stimulus spending boosts the economy before they enter data into their statistical models, rendering the results not a reflection of reality but rather a reflection of their Keynesian assumptions. It is these assumptions that are the real leaps of ideological faith.
Moreover, prior such CBO studies even directly admitted that their results are meaningless to determine if the economy is better off with the stimulus spending because they can’t know what path the economy would have taken absent the stimulus.
The intellectually lazy and economically illiterate “Washington Post Writer’s Group” may want to ponder why the two longest recessions in the U.S. over the last century also featured the two largest government interventions during a downturn. One can be perfectly “reasonable” and determine that the federal government’s response has prolonged the recession – hurting the economy in the short run by hampering the necessary readjustments needed for recovery.
Perhaps they would benefit from a quick history lesson about the recession of 1920-21. This recession featured a larger initial downturn in the economy. But rather than respond with massive government stimulus schemes, the federal government slashed its budget by 65% in one year. The result? A rapid recovery featuring unemployment rates falling under 7% by the following year, then falling to 2.4% by 1923.
The Washington Post Writers Group is concerned about the gap between ideology and reality. They should start by looking in the mirror.