They walk where no mortals dare. They face challenges that melt the resolve of ordinary people. They fearlessly stride the pathways of the world, towering over the feeble masses. Commoners worship them as gods, without whom their lives would dissipate into madness and chaos. Who are these giants that rule the world and whose wisdom is essential to our daily existence? They are economists.
Obtain a PhD in economics and you immediately achieve superhuman understanding of the world. Others gain respect and knowledge through years of study and experience, but economists alone become gods; true modern-day oracles. And among them are those special few anointed by a mysterious coven of Swedes as winners of the Nobel Prize. They walk the earth like Tyrannosaurus Rex, crushing anyone who stands in their way or questions their divine pronouncements.
OK, let’s get real. Sure, some economists do provide some value to the world, but no amount of charts, graphs, or cockamamie theories justify abandoning reality. Common sense rarely comes into play when you’re faced with the arcane proclamations of someone who happens to have studied economic theory. And the worst of the bunch are those who’ve won Nobel Prizes for quantifying aspects of markets that a merchant running a bodega in New York could have told you in less eloquent ways, but just as accurately.
A perfect example of the undue reverence given to economists is an interview done last year by MSNBC anchor Contessa Brewer with Congressman Mo Brooks (R-AL). (It’s available on YouTube and well worth watching for a great laugh.) While he’s explaining why President Obama’s fiscal policies are flawed and counterproductive, she questions the validity of his opinions by citing some big name economists like Bernanke and Geithner. She then asks him if he has a degree in economics, implying that his thoughtful and knowledgeable answers have no value unless he has a degree. Mr. Brooks replies that not only does he have a degree, but it was awarded by Duke University with highest honors. That shut her up. Mercifully, she was dropped by the network a month later.
The reason for this critique of economists is the debate over the current state – and the future direction – of the world economy. Should the governments of Europe cut their budgets (referred to with the distressing name “austerity”), or should they spend money that they don’t have by borrowing or printing it (referred to with the soothing term “stimulating”)?
The villains in Europe are the Germans, but this time they don’t deserve it. They’ve been telling countries like Greece and Spain, who have for years been living well beyond their means, that if they want Germany to restructure their debt (in effect, write it off), then they’ll have to cut back on their outrageous government expenditures (austerity). In response, there’s been rioting in the streets, precipitated by left-wing big-government types who are demanding an end to the cutbacks. The marching protesters want their due no matter who pays the tariff. They want unrealistic promises fulfilled even if the rest of their country suffers.
In truth, eliminating debt financing is like weaning yourself off heroin. There are withdrawal symptoms that take time to overcome. The disappearance of the false high of fake money slows down the economy, and causes changes in the job markets. Put simply, that’s why Europe is again on the verge of recession. The only alternative is reckless and irresponsible spending, but this strategy always results in the disaster of excessive inflation. The Germans are trying to cure the spending addiction slowly, a sensible policy choice much wiser than any alternative. But let us be clear all this government spending squeezes out the private sector crippling it from growing. That has been proven time and again.
And, yet, many economists claim that this is exactly the wrong policy, insisting that you can’t turn off the spigot and that you must grow (stimulate) your way to prosperity. Professor Paul Krugman hammers this point weekly in the New York Times, and professor Lawrence Summers echoes the sentiment in the Washington Post. They are relishing the victory of a socialist in France who wants to spend and spend in rejection of “austerity.” Both are well-known economists who argue that Europe shouldn’t cut back, but their real target is those in Washington who are demanding responsible budgets. Several of their colleagues who are of the same mindset are already hammering Republican plans for budget cuts as harmful to growth.
This meager human, armed not with an economics degree but with just plain old American common sense, challenges that theory. Their proposals are hogwash, and they inevitably lead to perpetual spending well beyond our means. David Axelrod claims that the Obama budgets will become more stable with increased revenues, bringing the annual deficit down to 3% of GDP, a level he insists that “economists all agree is manageable.” So apparently these highly educated individuals “all agree” that our federal government can run a $300 to $400 billion deficit every year without any negative ramifications. Common sense tells me that these people are not only wrong – they’re nuts!
The problem with stimulus spending – at least in its original Keynesian theory – is that it has to both start from and end with a balanced budget. But in fact, our federal budget hasn’t been balanced since 1957; even our budgets in the late 1990’s were “balanced” with money borrowed from the Social Security Trust Fund. So every time we face a crisis, we‘re already spending like the proverbial drunken sailor. We never really get back to point zero.
You can get an economist to give you just about any answer you want to achieve. The fact that so many can sit there with a straight face and claim that a national debt of 70% or 80% or 90% of GDP is quite acceptable just boggles my mind, and I hope it does yours. Unfortunately, economists have become as credible as weathermen on the local news.
The rain falling on me cannot be real because I was told last night that it would be sunny today. What Congressman Brooks said to Ms. Brewer made perfect sense to me even before I knew that he had any degrees. And I’m equally certain that massive stimulus spending is inevitably going to lead to significant cuts in services, staggering inflation, or national bankruptcy.