Friday, August 19, 2011

Mr. Obama and Mr. Europe, Both to Put Forth a New “New Plan”

And Why We Can Expect a New "New New Plan” After That

In Europe France and Germany and the European Union are working on yet another jplan to stave off financial and economic disaster.  The news in America is that President Obama in September will put forth a “new” plan to increase employment and reduce the deficit.

Want to Stimulate the Economy and reduce the deficit?
You're going to need a bigger bus!

ROCK ISLAND, Ill. — President Obama plans to make a major speech in early September laying out new proposals for job creation and taming the federal debt, according to the White House.

Obama is expected to make fresh proposals, possibly including tax cuts and new infrastructure spending, to spur hiring.

Ok, that takes care of the jobs, what about the deficit?

The president will also lay out a plan to trim far more from the federal debt than the $1.5 trillion target of a congressional “supercommittee” that is supposed to issue a proposal for Congress by Thanksgiving, the White House said. The plan is likely to include proposals for an overhaul of the tax code and entitlements.

Once again The Dismal Political Economist has to produce the ugly truth in economics, which is this. 

There is no program that will stimulate job creation and economic growth that will at the same time decrease the deficit in an economy that is plagued by inadequate demand.

You can have one, you can have the other but you cannot have both. Policy makers can no more repeal the laws of economic behavior than Presidents or would be Presidents can repeal the laws of mathematics.  

 Having politicians and government officials say 2 + 2 = 5 doesn’t make it so.

So why say what is not true and cannot be done.  Because the American people “can’t handle the truth.”  Here is famed Churchill biographer Max Hasting writing in the Financial Times.  The headline says it all.


Americans say that want honest leadership, that all they want is for political leaders to tell them the truth.  His point on current leadership and the public, in both America and Europe,

We know, we know
We can't handle the truth
You don't have to shout

Yet if today’s leaders told their peoples the truth, and articulated the most plausible and bleak scenarios for their economic future, I will bet my socks most would be electorally trounced by rivals claiming to offer panaceas – as Mr Obama might be in 2012. Voters acknowledge the theoretical notion that the west faces a challenge from Asia, but few grasp the scale of upheaval and sacrifice necessary to meet it.

And what about the future, won’t the crisis bring forth a Roosevelt, a Churchill, a ???

How much bad news will pampered European and American voters take? Not that much, I suspect, in the absence of bombs raining down around their heads, figuratively or literally. We get the political leaders we deserve. Recent evidence suggests that in America, especially, charlatans prosper on the hustings, while good people flinch from exposing themselves to the humiliations and deceits essential to secure public office. Unless or until electorates become more rational, I doubt we shall see leaders much better – though, please God and the Tea Party, no worse – than today.

How long will all this last.  Again Mr. Hastings.

Sir Mervyn King, governor of the Bank of England, said in a recent speech that Britain is at the midpoint of “seven lean years”. When I recently put it to a central banker that most western nations seem more likely to be starting 70 lean years, I was shocked by the readiness with which he assented.

All right, 70 years may be too much.  But seven lean years is way too little. 

The Dismal Political Economist
at Lunch with Political Leaders

Why doesn't the professional economics field tell the truth?  Because they would expose their shortcomings, that they are not brilliant people who can come up with a plan to stimulate the economy and at the same time reduce the deficit.  Politicians would not like them, or listen to them, or invite them to lunch or let them testify before meaningless Congressional committee hearings.

The Dismal Political Economist can say these things because he is not a charlatan politician, does not want to go to lunch with them and will never be invited to testify before a Congressional committee.  He is sorry to ruin your day, but he just thought you ought to know.  

No comments:

Post a Comment