Keynesian Economics and the Wizard of Oz

When Dorothy and her friends finally reach Oz, they present themselves to the almighty Wizard, only to eventually discover that he is just an illusion maintained by a charlatan hiding behind a curtain. This seems eerily akin to to the state of Keynesian economics. It does not matter that Keynesianism isn’t working for Obama. It does not matter that it didn’t work for Bush, or for Japan in the 1990s, or for Hoover and Roosevelt in the 1930s.

In the ultimate triumph of theory over reality, the Keynesians say all that matters is the macroeconomic model behind the curtain showing that more government spending leads to more jobs and growth. Consider the recent report from the Congressional Budget Office (CBO), which claimed that Obama’s stimulus created at least one million jobs. As Brian Riedl of the Heritage Foundation noted:

CBO’s calculations are not based on actually observing the economy’s recent performance. Rather, they used an economic model that was programmed to assume that stimulus spending automatically creates jobs — thus guaranteeing their result. …The problem here is obvious. Once CBO decided to assume that every dollar of government spending increased GDP…, its conclusion that the stimulus saved jobs was pre-ordained.

But surely this can’t be true, you may be thinking. Our public servants in Washington would not make important policy decisions based on a model that automatically produces a certain result, would they? Peter Suderman of Reason pulls aside the curtain:

…those reports rely on assumption-packed models that effectively predetermine their outcomes; what they say, in essence, is that the stimulus worked because we assume it did. …That’s especially true when estimating government spending’s productive effects, which is accomplished by plugging numbers into a formula that assumes that government spending produces a multiplier—an increased return for every government dollar spent. In other words, it extrapolates from how much money is put in rather than from what has actually come out. And it does so using a formula that dictates that if money is put in, even more money will come out. According to the CBO’s estimates, depending on how the money is spent, one dollar of government spending can produce total economic activity of up to $2.50. What a deal! …for all practical purposes, the same multipliers that were used to predict how many jobs would be created are being used to estimate how many jobs have been created.

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Tags: Big Government, CBO, Deficit, Economics, federal spending
Posted Mar 13th 2010 at 5:10 pm in Congress, Economics, News, Obama, Politics, Uncategorized | 88538248 Commentshttp://biggovernment.com/dmitchell/2010/03/13/keynesian-economics-and-the-wizard-of-oz/Keynesian+Economics+and+the+Wizard+of+Oz2010-03-14+01%3A10%3A17Dan+Mitchell

Jerry Brown Proves He Has Nothing Relevant To Say

In the category of least surprising, and therefore most anti-climatic, decisions of all time, Jerry Brown announced that he is running for Governor of California. He did so through an Internet video. Certainly I realize how fashionable the Internet is for candidates – but Brown’s choice of venue to announce his campaign was probably less hip than hiding – much like his virtual absence from the campaign trail the last few months.

Quite frankly, the former media-hound Brown has been hiding because he has nothing relevant to say. Indeed, the most important issues of the day all run counter to Jerry Brown’s current policies. Let me count the ways . . .

1. The Budget/Taxes.  In this perennial saga, California has yet another $20 billion+ budget deficit. The Democrats and their Union patrons want more spending and higher tax rates. The Republicans, including their statewide candidates and Brown’s Republican opponents, want less spending and lower tax rates. The California voters, according to the Field Poll (never known to lean to the Right), want lower spending not higher taxes. What’s the current version of Jerry Brown to say under those circumstances? Other than saying he will leave it up to the voters to raise taxes (the so-called leader is asking to be led), he has remarkably little to say – and that is one reason he avoids the press and limelight so assiduously – including campaign announcements devoid of those annoying press questions like – would you veto a Democrat sponsored tax increase bill?

2. Jobs. Nevada is the Nation’s #1 business development State. California is either last or second to last when it comes to being employer friendly because of high tax rates and the nation’s most onerous regulatory burden. See the correlation anyone? California, like the nation, faces a simple choice: government jobs or private sector jobs. Government jobs cost money California does not have. Private sector jobs require tax relief and lower regulations. Brown can’t advocate more spending very well and he can’t seriously claim he will go against the unions and the Democrats in the legislature when it comes to taxes and regulations. So what’s the current version of Jerry Brown to say under those circumstances? Remarkably little.

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Tags: Central Valley, global warming, Government spending, high taxes, Jerry Brown
Posted Mar 3rd 2010 at 5:36 am in Environment, Featured Story, News, Politics, State Politics, Uncategorized | 8330660 Commentshttp://biggovernment.com/tdelbeccaro/2010/03/03/jerry-brown-proves-he-has-nothing-relevant-to-say/Jerry+Brown+Proves+He+Has+Nothing+Relevant+To+Say2010-03-03+13%3A36%3A59Thomas+Del+Beccaro

RNC Wants Collective Bargaining with Tea Parties

It has only been a matter of weeks since Neil Cavuto interviewed me to share my opinion regarding Michael Steele’s sudden interest in the Tea Party Movement. It appears Michael Steele is showing up with candy and flowers this Valentine’s Day. Using my experience as a Tea Party organizer I explained that the RNC was on probation and that I felt confident that the Republicans would have to stand up and show their outrage over spending, the trampling of our constitution, and a myriad of other issues before their status would change in the eyes of the American people. Republicans have often played the helpless victim while hardworking Americans (the true victims of this governmental meltdown) stand and fight.

At the same time I warned of the impending disaster that would result in the creation of a third party. To use some of the language popular with the current administration this would be a Tea Party equivalent to the “Nuclear Option.” The result would be a split vote that would turn the keys over to liberals for yet another term.

Before I go further I must clarify that Americans for Prosperity, 9/12 groups, and in many cases Tea Parties share the same doctrine and values. There are thousands of these groups that are autonomous and effective organizations in their own right. I respect these organizations and fully understand the importance of working with them as separate, viable entities in our fight for liberty.

Under the Constitution we band together as individual voters that govern individually with our ballots, this is our only legal tie. Grassroots voters harness power via their collective ballots, which captures the attention of organizations like the RNC. The RNC has a role similar to that of a labor union speaking on behalf of Republican candidates. Collective bargaining is the RNC’s desired result, as they want to harness the power of the massive grassroots organizing effort undertaken by so many Americans and their votes. We don’t have to negotiate with the RNC.

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Tags: 9/12 groups, Americans for Prosperity, Ensuring Liberty, Government spending, Michael Steele
Posted Feb 16th 2010 at 6:27 am in Congress, Politics, State Politics, Tea Party | 75906233 Commentshttp://biggovernment.com/smcqueen/2010/02/16/rnc-wants-collective-bargaining-with-tea-parties/RNC+Wants+Collective+Bargaining+with+Tea+Parties2010-02-16+14%3A27%3A23SFC+Steve++McQueen+%28Ret.%29

Hammer Time

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Tags: Government spending, government waste
Posted Feb 15th 2010 at 4:44 pm in Earmarks | 7535837 Commentshttp://biggovernment.com/cmuir/2010/02/15/hammer-time/Hammer+Time2010-02-16+00%3A44%3A03Chris+Muir

The Right of Recall

Congress is out of control.  The public overwhelming opposes a government takedover of our health care. But Congressional leaders are telling us they don’t care – that they know best, and they’re going to pass it anyway.

We are getting the same attitude on other issues, from global warming regulation, to taxes, government spending, deficits, federal debt, energy policy, welfare, corporate bailouts, and beyond.  Too many of our elected Members of Congress are making behind-closed-door deals and ignoring their constituents, calling them “yahoos,” “Nazis”,“and “tea-baggers.”

This isn’t American democracy — this is a shop-worn, elitist, authoritarianism closer to abuses we see in countries like Venezuela.

So, what would happen if the people could change this rotten situation?

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Tags: congressmen, corporate bailout, Deficit, federal debt, global warming
Posted Feb 9th 2010 at 8:19 am in Congress, Justice/Legal, News, Politics, State Politics | 72582217 Commentshttp://biggovernment.com/pferrara/2010/02/09/the-right-of-recall/The+Right+of+Recall2010-02-09+16%3A19%3A49Peter+Ferrara

The Problem is Spending, not Deficits

Reckless spending increases under both Bush and Obama have resulted in unprecedented deficits, which is the reason for boosting the nation’s debt limit by an astounding $1.8 trillion. Government borrowing has become such a big issue that some politicians are proposing a deficit reduction commission, which may mean they are like alcoholics trying for a self-imposed intervention.

But all this fretting about deficits and debt is somewhat misplaced. Government borrowing is a bad thing, of course, but this video explains that the real problem is excessive government spending.

Fixating on the deficit allows politicians to pull a bait and switch, since they can raise taxes, claim they are solving the problem, when all they are doing is replacing debt-financed spending with tax-financed spending. At best, that’s merely taking a different route to the wrong destination. The more likely result is that the tax increases will weaken the economy, further exacerbating America’s fiscal position.

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Tags: Big Government, budget, budget deficit, Conrad, Deficit Commission
Posted Dec 21st 2009 at 11:37 am in Congress, Earmarks, Economics, Healthcare, Obama, Politics, Pork Report, Tax Reform, Uncategorized | 4678634 Commentshttp://biggovernment.com/dmitchell/2009/12/21/the-problem-is-spending-not-deficits-2/The+Problem+is+Spending%2C+not+Deficits2009-12-21+19%3A37%3A40Dan+Mitchell

Reid’s Health Care Bill by the Numbers

Let’s take a quick look at numbers behind the Senate health care bill introduced by Senate Majority Leader Harry Reid.

Reid claims his bill will cover 94 percent of the population at a cost of $849 billion over 10 years.

The population of the country is roughly 300 million.

At this point you need to understand one thing – there are two vastly different numbers used for the uninsured. The first number consists of all the people uninsured at some point in a given year, whether they are citizens or here illegally. The second number is the chronically uninsured, those who have spent an extended period of time (years) without insurance. The number for the former, the one I like to call the “kitchen sink” number, is one with which you are undoubtedly familiar: 47-49 million. The number for the latter, the chronically uninsured, is one you may not have heard before: 12-15 million.

How these differing numbers come to be is a story for another day, but let’s analyze both of them for the sake of argument.

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Tags: chronically uninsured, employer provided coverage, government health care, Government spending, Harry Reid
Posted Dec 6th 2009 at 6:51 pm in Healthcare | 3395042 Commentshttp://biggovernment.com/dhunter/2009/12/06/reids-health-care-bill-by-the-numbers/Reid%27s+Health+Care+Bill+by+the+Numbers2009-12-07+01%3A51%3A01Derek+Hunter

Pork Report November 17, 2009: Post Office Edition

The U.S. Postal Service lost $3.8 billion last year

Winery receives federal stimulus grant

Musicians more effective communicating in noisy environments than non-musicians, according to findings of a National Science Foundation study

Only 20 percent of Americans hold positive view of government

Research company receives millions of dollars of congressional earmarks and has nothing to show for it

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Tags: border control, border patrol, congressional earmarks, Earmarks, federal bailout
Posted Nov 17th 2009 at 7:29 pm in Pork Report | 3249019 Commentshttp://biggovernment.com/porkreport/2009/11/17/pork-report-november-17-2009-post-office-edition/Pork+Report+November+17%2C+2009%3A+Post+Office+Edition2009-11-18+02%3A29%3A08The+Pork+Report

Health Care ‘Reform:’ $500 Hammers and the Reverse Economies of Bureaucratic Scales

At the center of the health care debate is the simple – but profound – question of whether government can deliver services, in this case health care services, better than private enterprise sensibly regulated.   President Obama clearly believes that the ‘public option will not only be more equitable but more efficient as well – a claim he made when he spoke to the Joint Session of Congress earlier this year.  Of course, nothing could be further from the truth.

The reason Obama is wrong, and the Left in general on issues of public options versus private enterprise, is simple human nature.  When it comes to such matters, it was never so well explained as by the legendary Milton Friedman:

“There are four ways in which you can spend money.  You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else.  For example, I buy a birthday present for someone.  Well, then I’m not so careful about the content of the present, but I’m very careful about the cost.  Then, I can spend somebody else’s money on myself.  And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch!  Finally, I can spend somebody else’s money on somebody else.  And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get.  And that’s government.”

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Tags: Barack Obama, bureaucracy, federal spending, government health care, Government spending
Posted Nov 17th 2009 at 10:21 am in Healthcare, News, Obama, Politics | 3211034 Commentshttp://biggovernment.com/tdelbeccaro/2009/11/17/health-care-reform-500-hammers-and-the-reverse-economies-of-bureaucratic-scales/Health+Care+%27Reform%3A%27+%24500+Hammers+and+the+Reverse+Economies+of+Bureaucratic+Scales2009-11-17+17%3A21%3A26Thomas+Del+Beccaro

The Economy is Growing. Right. And I Don’t Have a French Accent.

We should be happy. The Bureau of Labor Statistics announced a 3.5 percent growth in this year 3rd quarter. Yet, most of us aren’t. At least I know I am not. Why? Because I have no faith in the numbers.

First, the Gross Domestic Product (GDP) numbers include government spending. So, when the government pumps thousands of billions of dollars into the economy it will look as if GDP is growing.

What’s more, the way the GDP accounts for government spending is totally biased: It assumes that if the government is spending $200,000 on a contractor to repave a road in the middle of nowhere that it will create $200,000 of genuine economic value.  By contrast, GDP measures are tougher on private-sector spending. As my George Mason university colleague Garett Jones explained to me recently “So if Exxon Mobil pays an engineer $200,000 per year, that only shows up in GDP if the engineer finds an extra $200,000 of oil to sell, or builds a new machine that sells for $200,000, something like that.  So our GDP measures of “government spending” are awful–and when the government is in a race to spend money as quickly as possible, these measures are going to be even worse than usual.”

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Tags: Bureau of Labor Statistics, Economy, executive compensation, GDP, George Mason University
Posted Oct 30th 2009 at 10:43 am in Economics, News | 2293431 Commentshttp://biggovernment.com/vderugy/2009/10/30/the-economy-is-growing-right-and-i-dont-have-a-french-accent/The+Economy+is+Growing.+Right.+And+I+Don%27t+Have+a+French+Accent.2009-10-30+17%3A43%3A59Veronique++de+Rugy

Obama and the Nobel: Right Man, Wrong Prize

The Norwegian Nobel Committee wanted to let everyone know that they really like Barack Obama. They approve of his political views and they want him to remake the world according to his vision.  Okay, we get it.  The Norwegians, one of the most homogeneous societies in the world, whose sole significant imprint on the world stage is the annual awarding of this increasingly worthless prize, arrogantly assume the role of moral arbiters of United States politics.  Thanks.  Appreciate it. 

It is blatantly absurd to award the Nobel Peace Prize to a nine-month president with absolutely no foreign policy achievement of note.  Especially when there are so many other fields where the Academy could justify lavishing glory, (and money–one wonders what POTUS will do with the cash?) on their secular savior. 

 President Obama has written two highly acclaimed (by the left) books.  Dreams from My Father is his accounting of his unique life story and his journey to understand his roots and his father’s abandonment of him and his mother.  It was called, “the best-written memoir ever produced by an American politician,” by fawning sychophant Joe Klein.

 His second book, The Audacity of Hope (the first campaign flier published by Crown) was his soaring vision of a nation and world guided by the kind of social justice that only a community organizer can envision.  No less a literary critic than Gary Hart called Obama a, “figure who possesses perseverance and writing skills that have flashes of grandeur.”  The book occupied the New York Times Bestseller List for thirty weeks and won a Grammy to boot.

Almost any writer would kill to have sold as many volumes and have his or her books become so influential.  Surely the Nobel Prize for literature would have been much more justifiable.

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Tags: Audacity of Hope, Dreams of My Father, Government spending, health care reform, J. M. Keynes
Posted Oct 9th 2009 at 10:21 am in Culture, News, Obama, Politics, Uncategorized | 1493069 Commentshttp://biggovernment.com/dobrien/2009/10/09/obama-and-the-nobel-right-man-wrong-prize/Obama+and+the+Nobel%3A+Right+Man%2C+Wrong+Prize2009-10-09+17%3A21%3A56Doug+O%26%2339%3BBrien

Federal Spending Doubles in Less Than a Decade

Remember the good old days, when the federal government was, shall we say, smaller? And by “smaller,” I mean half the size it is today.

Well you should, because that was only nine years ago.

Economist Chris Edwards ran the numbers, and found that since 2000, the federal government’s budget has doubled, from $1.79 trillion to an estimated $3.65 trillion today. Much of that can be contributed to former president Bush’s giant spending programs and the increase in defense spending to pay for the wars, but the largest upswing occurred just in the past year.

In 2009, the federal budget exploded from $2.98 trillion to an estimated $3.65 trillion, which would be the largest one-year leap in nearly 60 years when adjusted for inflation.

DownsizingGovernment.com has all the details, including a breakdown of federal spending by each federal department. It might even make you pine for those “old days.”

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Tags: Chris Edwards, federal spending, Government spending, President Bush, President Obama
Posted Oct 5th 2009 at 10:20 pm in Congress, Politics | 1298236 Commentshttp://biggovernment.com/cmoody/2009/10/05/federal-spending-doubles-in-less-than-a-decade/Federal+Spending+Doubles+in+Less+Than+a+Decade2009-10-06+05%3A20%3A04Chris+Moody

Real-World Evidence Shows Big Government Undermines Economic Performance

On Wednesday, a video was posted explaining the theoretical reasons why excessive  government spending hurts growth. Just in time for the weekend, here is the second installment in the two-part series. Using cross-country data and citing scholarly research, the video reviews specific evidence on the negative impact of bloated government. Share it with your friends, of course, but especially send it any statists in your address book. Can’t hurt to expose them to the truth.

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Tags: Big Government, Government spending
Posted Sep 25th 2009 at 5:14 pm in Congress, Politics | 889834 Commentshttp://biggovernment.com/dmitchell/2009/09/25/real-world-evidence-shows-big-government-undermines-economic-performance/Real-World+Evidence+Shows+Big+Government+Undermines+Economic+Performance2009-09-26+00%3A14%3A58Dan+Mitchell

ACORN Is a Symptom, Big Government Is the Disease

By overturning the rock and letting America witness the corruption at ACORN, Hannah and James have performed an incredibly valuable service. The rest of us now have an obligation to take the next steps. Shutting off the federal spigot to ACORN obviously is the immediate priority, but it is critically important that we also use this episode to explain that big government is inherently corrupt. The graft at ACORN was not an isolated example. The sleaze at Fannie Mae and Freddie Mac were not exceptions. The pay-to-play scandals at the Appropriations Committees are not once-in-a-lifetime occurences.

As explained in this short video (alas, no exciting undercover revelations), the government’s bloated budget of nearly $4 trillion is a honeypot for special interests and their political lackeys. But it is not just a problem of wasteful spending. The massive regulatory apparatus creates similar opportunities for favor swapping and insider deals. And the tax code, with tens of thousands of pages of loopholes and special preferences, also is a rat’s nest of corruption.

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Tags: ACORN, Barak Obama, Big Government, corruption, Fannie Mae
Posted Sep 21st 2009 at 8:10 am in ACORN, Congress, Economics, Obama, Politics | 593043 Commentshttp://biggovernment.com/dmitchell/2009/09/21/acorn-is-a-symptom-big-government-is-the-disease/ACORN+Is+a+Symptom%2C+Big+Government+Is+the+Disease2009-09-21+15%3A10%3A27Dan+Mitchell