The New York Times and the 'Stimulus': Keynesian Anti-Logic
American political culture always seems to be “celebrating” the anniversary of something, be it JFK’s assassination (we just passed the 50th anniversary of that sad event) or the signing of some (mostly bad) legislation. The latest political activity to be enshrined with an anniversary is the so-called Stimulus, the $800 billion monstrosity passed five years ago ostensibly to “put America back to work.”
Not surprisingly, the New York Times has editorialized that any criticism of the spending bill — at least any criticism which says “too much” was spent — is a Republican “myth and falsehood.” Not only was the “Stimulus” a legitimate piece of legislation, sniffed the NYT, but it also:
…prevented a second recession that could have turned into a depression. It created or saved an average of 1.6 million jobs a year for four years. (There are the jobs, Mr. Boehner.) It raised the nation’s economic output by 2 to 3 percent from 2009 to 2011. It prevented a significant increase in poverty — without it, 5.3 million additional people would have become poor in 2010.
Like all examples of the Broken Window Fallacy, the spirited defense of this spending bill is based upon “accounting” methods that count the people hired through “Stimulus” spending as “new jobs” but fail to note how others might have lost their own means of employment. Now, this was a bill that, among other things, had workers rolling sod into the grass median of I-68 (which is near my home) in an area where runoff from tons of salt thrown onto roads by state highway crews (our area receives a lot of snowfall). Not surprisingly, within a year, all of the new grass was dead.
I liken the “Stimulus” to throwing a bit of lighter fluid onto a pile of soaking wet wood. The flames pop up for a few seconds, but then disappear as the effects from the fluid go away. (No, repeated douses of “Stimulus” fluid do not ultimately gain traction and then lead to a miraculous economic recovery.)
If Beltway political culture permits any criticism of the Holy Stimulus, it is this: “The Stimulus wasn’t big enough.” Intones the NYT: “The stimulus could have done more good had it been bigger and more carefully constructed.”
The rest of the editorial is a compilation of near-plagiarism from Paul Krugman’s columns and blog posts, and it reflects how Keynesian Anti-Logic works. The “logical” narrative goes as follows:
- “Enough” government spending during a recession will bring the economy to “full employment.”
- The economy is not at full employment.
- Therefore, there wasn’t enough government spending.
Should one question the Keynesian premises of this awful syllogism, the standard answer is: America had “full employment” during World War II. (Robert Higgs has thoroughly debunked this enduring myth.) But, then, so did Germany and the U.S.S.R., according to Keynesian standards, but no one envies what people there experienced!
The problem of interpreting the results of the Stimulus is not bad politics. It is bad economics or, to be more specific, one of bad economic logic. To a Keynesian, an economy is a homogeneous mass into which the government stirs new batches of currency. The more currency thrown into the mix, the better the economy operates.
Austrian Economists, on the other hand, recognize the relationships within the economy, including relationships of factors of production to one another, and how those factors can be directed to their highest-valued uses, according to consumer choices. The U.S. economy remains mired in the mix of low output and high unemployment not because governments are failing to spend enough money but rather because governments are blocking the free flow of both consumers’ and producers’ goods and preventing the real economic relationships to take place and trying to force artificial relationships, instead. (Green energy and ethanol, anyone?)
Austrians arrive at their position through logic, but logic that is based in what we already know about human action. Unlike Keynesian “logic,” the premises of Austrian Economics are sound, so the conclusions derived from them also are sound. No wonder the Austrian position is banned from the NYT editorial page!