Who’s Benighted?

by Don Boudreaux on September 11, 2011

in Budget Issues, Debt and Deficits, Fables, Great Depression, Myths and Fallacies, State of Macro

Here’s a letter to the Washington Post:

Steven Pearlstein alleges that a laughable mysticism drives those of us who “reject as thoroughly discredited all of Keynesian economics, including the efficacy of fiscal stimulus, preferring the budget-balancing economic policies that turned the 1929 stock market crash into the Great Depression” (“The magical world of voodoo ‘economists’,” Sept. 11).

Before guffawing at us oafs, Mr. Pearlstein should check his facts.

After running a budget surplus in 1930, Uncle Sam ran a budget deficit in 1931 of $462 million and a budget deficit in 1932 of $2.74 billion.  Moreover, 1932′s budget deficit was four percent of GDP – a deficit-to-GDP ratio the size of which was not matched after 1946 until 1976, and which was exceeded by only three of FDR’s non-war-year budgets.  For 1930-1932 as a whole, the U.S. government ran a net budget deficit of $2.46 billion.*  Herbert Hoover’s deficit spending was so alarming that, during the 1932 presidential campaign, FDR emphasized his own commitment to reverse what then seemed to be unprecedented fiscal recklessness.

Of course, FDR broke that campaign pledge.  He ran a budget deficit during every year of the greatly depressed 1930s – a fact that should cause Mr. Pearlstein to shed some of the arrogance with which he dismisses skeptics of Keynesian economics.

Sincerely,
Donald J. Boudreaux

* See Tables 1.1 and 1.2 here.

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{ 86 comments }

SweetLiberty September 11, 2011 at 11:33 am

From 1931 onwards, deficits do indeed seem to be the norm – surpluses the exception. But this alone doesn’t tell us much about the state of the economy unless we deny that there were good years and bad throughout those decades, some with surpluses, most with deficits. There seems no point to prove here for or against Keynesianism, or for or against balanced budgets just looking at these numbers without direct correlation to economic prosperity. Even during surplus years, is it certain that the economy was legitimately doing well, or was it inflating an unsustainable bubble? Were Hoover’s and FDR’s deficits the cause of prolonging the Great Depression, or if they would have implemented the same policies with a surplus, would the results have been the same?

While I believe governments should operate within their means, it is the policies, not the surplus or deficit that should be the primary focus. Spending is the cause, deficits one effect. Eliminate wasteful and unconstitutional spending, and the deficit/surplus problem becomes largely moot.

Seth September 11, 2011 at 2:00 pm

“There seems no point to prove here for or against Keynesianism”

I don’t believe that was the intention. I believe the intention was to demonstrate that Pearlstein’s argument doesn’t pass a basic fact check and that arrogance shouldn’t be mistaken for a legitimate argument.

SweetLiberty September 11, 2011 at 2:27 pm

[FDR] ran a budget deficit during every year of the greatly depressed 1930s – a fact that should cause Mr. Pearlstein to shed some of the arrogance with which he dismisses skeptics of Keynesian economics.

Don is making the argument here that, because FDR ran budget deficits, Mr. Pearlstein should not dismiss skeptics of Keynesian economics. The two don’t necessarily correlate.

Andrew_M_Garland September 11, 2011 at 6:04 pm

Pearlstein [simple meaning]:
Anti-Keynesians prefer the budget-balancing economic policies that turned the 1929 stock market crash into the Great Depression.

Mr. Boudreaux points out that there was no budget balancing after 1930. Pearlstein cites a supporting fact that is not true, and blames budget balancing for causing the great depression (turning a stock crash into a depression).

Pearlstein’s offered reason is false for dismissing critics of Keynes.

SweetLiberty September 11, 2011 at 7:09 pm

Pearlstein’s case:
1) Budget-balancing economic policies turned a crash into the Great Depression.
2) Therefore, budget-balancing is bad, deficits and fiscal stimulus are good.
The fact that there was NO budget-balancing during the Great Depression only strengthens Pearlstein’s case IF he believes that budget-balancing would have made things far worse (which I’m sure he does). IF budget-balancing lead to the Great Depression, than doing more of the same would only make the economy sicker, and therefore deficit spending and stimulus was the way to go. Pearlstein never denies deficit spending during the Great Depression, something which Don took great pains to point out.

Pearlstein indeed makes an error correlating budget-balancing with causing the Great Depression, and makes the same error correlating deficit spending and stimulus (and I’m sure WWII) as the cure. But Don doesn’t prove here that budget balancing wasn’t the cause of the Great Depression (any more than Pearlstein proves that it was), or that deficit spending wasn’t ultimately better for the depressed economy, which could have even been worse. Again, no substantive argument for or against anti-Keynesians here that I can see. (He’s made much better arguments elsewhere, IMO.)

Kirby September 11, 2011 at 7:16 pm

Hoover, the president during the years leading to the Great Depression, did NOT balance his budget.

SweetLiberty September 11, 2011 at 10:44 pm

Coolidge ran surpluses prior to the Great Depression, Hoover ran a surplus in 29 & 30. I personally think it is ridiculous to blame balanced budgets (surpluses) for the Great Depression, but IF one wishes to draw this correlation, it is there to be made.

Craig September 11, 2011 at 6:15 pm

“Were Hoover’s and FDR’s deficits the cause of prolonging the Great Depression”

No, probably not. Their silly policies of maintaining high wages, regulating industry, attempting to nationalize electrical utilities, and implementing price controls were the primary causes. The deficits were just a waste of money and, therefore, capital.

Keynesianism fails because consumer spending is the result of production; not its cause.

Kirby September 11, 2011 at 7:18 pm

actually, they are intertwined. If demand increases, prices will rise and more will presumably be created until a new equilibrium is found. If production increases, then the price will drop and demand will rise.

kyle8 September 11, 2011 at 10:37 pm

You made the point that I would have made. Budget deficits are not that big a deal until your total debt service begins to eat up a huge amount of your revenues (as it is now).

Those, in and of themselves do not cause or remove a recession. However, the incredibly high amount of meddling in every single facet of the economy by people who pretended to know, but had no clue of what they were doing is the real culprit in making the Depression worse.

And the same factors are in play today. (except it is worse today because we do have a crippling debt to service.)

SweetLiberty September 12, 2011 at 12:03 pm

I agree with you and Craig that the focus should be on government meddling and spending, not surplus vs. deficit.

House of Cards September 11, 2011 at 12:02 pm

I am completely against deficit spending except in a dire emergency. The rich have to ante up during hard times to fund any and all government spending. If a government is running deficits while the rich are jet setting and living high on the hog, then the political system is broken and designed to benefit the rich, which it is. People became fabulously rich during the roaring twenties. Some lost their fortunes and a few jumped out of high-rise buildings when the stock market crashed in 1929. The remaining selfish rich were waiting out the depression, and let their fellow citizens suffer for the most part.

Methinks1776 September 11, 2011 at 1:16 pm

You might as well say that you are against theft except when you think it’s an emergency.

Some practical questions:

Why are you so offended by the rich jet setting on their own dime and not at all offended by politicians jet setting on yours. For instance, Nancy Pelosi (to name just one “public servant”) flies on a private jet paid for by taxpayers to and from Washington D.C. Your president just completed a “bus tour” where he transported himself and his bus on two separate airplanes to campaign locations at your expense. This is what you want “the rich” to pay for? For politicians to live high on the hog?

If you had a bright idea and you thought that with enough investment, and hard work on your part you could turn it into a profitable enterprise and become wealthy, why would you make the effort if you knew that in the next downturn, it would be taken from you to pay for the profligacy of your less productive neighbours, the government’s foreign adventures, wealth transfers to other governments and to keep our public servants in the high style to which they have become accustomed?

If your less wealthy neighbour bought a house he couldn’t afford, do you suppose it’s your responsibility to make sure he is maintained in the lifestyle to which he has become accustomed at your expense? Would you keep working if he could at any time come to your house to confiscate what you’ve earned at the point of a gun?

Deb September 11, 2011 at 11:14 pm

Great questions. I often think those things, but thanks for expressing it so well.

Methinks1776 September 11, 2011 at 1:19 pm
House of Cards September 11, 2011 at 1:49 pm

I would, of course, tax the idle rich like you much more. You need to get off your lazy butt and work harder to support the millions who recently lost their home to foreclosure that your greedy policies helped induce. If you choose not to, it is off to a Gulag in Siberia with you – hard labor. I would sent you there regardless because of your tiresome, banal commentary here. Your Russian is getting rusty, too, no doubt.

Quoting Walter Williams about economics is like quoting Clarence Thomas about jurisprudence. You are again shown to be the laughing stock of decent society. Some cases like you are simply irredeemably hopeless.

Chucklehead September 11, 2011 at 2:59 pm

Is this the same decent society that sends those who do not agree to Gulag work camps because they don’t like what people choose to do with their free time? In fact they don’t like free time at all. The sole human function is to work for the collective and reproduce. You would love the Borg.

Methinks1776 September 11, 2011 at 4:08 pm

Mao_Dung! Welcome back.

The Other Tim September 11, 2011 at 5:57 pm

1) Housing bubbles aren’t sustainable. Blame the folks screwing around with the availability of credit for instigating a bubble. You speak as if the rich in general just decided to stop using their magic powers to make bubbles into something that can go on forever.

2) Money is either being used, in which case it’s not idle, or it’s not being used, in which case it’s not really part of the money supply. In which case you ought to be able to just print money without causing inflation according to mainstreamers. Which is to say, there are no occasions in which the mainstream economist ought to be allowed to argue that we need to tax the rich to get their “idle” money. Just fire up the printing presses and you’ll get the money you need with far less deadweight loss.

Josh S September 11, 2011 at 8:30 pm

I like it when you socialists talk about “you idle rich” as though anyone who makes six figures spends all day in a golden palace, being fed grapes by servants. Sounds nice.

Methinks1776 September 11, 2011 at 8:46 pm

True. But if they are, so what? If the parents earned a fortune and bequeathed it to their offspring, it’s still none of anybody else’s business. Jealousy is an ugly, soul corroding thing.

Economic Freedom September 12, 2011 at 12:56 am

What’s even more amusing is the fact that many — perhaps most — very wealthy people are socialists. Socialism benefits the wealthy because central planning blocks free entry into the market by potential competitors.

vikingvista September 12, 2011 at 4:26 am

Whatever leads people to larceny, jealousy or otherwise, is ugly. I suppose some sanctimoniously rationalize away fairness of treatment for the sake of fairness of outcome. Even with all its scholarly discourse, friendly debate, and elbow-patched sport jackets, that too is ugly.

Economic Freedom September 11, 2011 at 11:42 pm

I would, of course, tax the idle rich like you much more.

Anyone who earns a living in the private sector — rich or not — isn’t idle. Only politicians comprise the class known as “the idle.” They live — often very well — at the expense of taxpayers. Apparently, you have no moral problem with that. Perhaps you’re a politician?

As for a private citizen’s obligation to keep everyone else maintained in the lifestyle to which he or she has become accustomed, I have a better policy idea:

Molon Labe. Come and take it from me, House of Cards; we’re interested in seeing how far you’ll go. Bring backup, because I’ll be defending myself and my property. :)

Stone Glasgow September 11, 2011 at 11:43 pm

Hell yeah! We are all one big happy family, and we help each other out in times of need, spending all waking hours supporting strangers we will never meet and may hate us if we were ever to meet them. If we refuse we are bad, bad, ugly people who deserve to be drug out into the street and shot!

Pom-Pom September 12, 2011 at 11:05 am

HoC is a hater racist pig!

vikingvista September 11, 2011 at 9:59 pm

Why is my hardship the responsibility of an arbitrary rich person? I don’t recall all rich people promising me anything.

Deb September 11, 2011 at 11:33 pm

So true. We should all by crying “Tax the Politicians” instead.

Economic Freedom September 12, 2011 at 12:49 am

We should all by crying “Tax the Politicians” instead

And reducing the tax burden on everyone in the private sector is the only way to “tax a politician.”

dsylexic September 12, 2011 at 2:08 am

i would go further and disenfranchise govt workers from voting.thieves should not have a right in deciding the men who will loot on their behalf

vikingvista September 12, 2011 at 3:50 am

Voting doesn’t really matter much. How about just stopping the looting?

Pom-Pom September 12, 2011 at 12:06 pm

“i would go further and disenfranchise govt workers from voting.”

The only problem is that much government spending goes to private companies too. Workers in those industries would also want government largesse.

The problem with massive government spending is the tentacles are everywhere. Too many people have a vested interest in feeding the pig that can’t be slaughtered.

vidyohs September 11, 2011 at 12:14 pm

The way I read that article is basically Pearlstein is saying that those who he denigrates are foolish for disbelieving the evidence of the Great Depression and how it was made worse by Saint FDR, and even more foolish for believing that not stealing money from the producers is a good thing, and worst is that we do not believe that credit can ever be income.

My favorite line from his idiocy is this: “But what’s striking is that when Rick Perry stands up and declares that “Keynesian policy and Keynesian theory is now done,” not one candidate is willing to speak up for the most important economic thinker of the 20th century.” Why not add that it is striking that we libertarians and conservatives have ideas on liberty that do not allow us to laud the three most important politicians in the 20th century, Hitler, Stalin, and Mao.

If Pearlstein is good enough to write for the Washington Post, it tells you a lot about the Post.

steve September 11, 2011 at 12:20 pm

GDP dropped rapidly until 1932. It then grew at the fastest rates seen in the 20th century.

Steve

kyle8 September 11, 2011 at 10:44 pm

Yeah genius, GDP has a government component. If you raise the government component by a factor of ten, then it goes up, but that does not mean that people are better off.

Try reading an econ book. I recommend anything Russ Roberts, Don Boudreaux, or Walter Williams.

muirgeo September 11, 2011 at 12:23 pm

His big picture is key… boy was that 20th century awful…. with its taxes and its government and all that. We suffered so much.

“Repeal the 20th century. Vote GOP.” LOVE IT…. every now and then you have a generation born into too much comfort and that they shoot themselves in the foot… that’s us.

EG September 11, 2011 at 12:25 pm

Muirgeo, I’m always with ya buddy!! We’ve got plenty of money to get out of this mess. I mean…we’ve got your money! What tax rate do you want to be taxed at? Let us know, and we’ll make it happen.

The Other Tim September 11, 2011 at 5:33 pm

Anyone who could propose that government was responsible for the prosperity of the 20th century has crossed the line into venerating government as a God.

vikingvista September 11, 2011 at 10:04 pm

Those bureaucrats really earned their deadweight. If only Americans weren’t too stupid to know what is good for them, they wouldn’t have to be forced to pay for it.

brotio September 12, 2011 at 12:30 am

Yasafi sports an avatar of a politician. He worships at a church founded by another politician. Of course government is God.

Kirby September 11, 2011 at 7:27 pm

Ever since the 1920′s, technological advances pioneered by the free market have made it so easy to live that the government has to actively make things harder in order to build character.

Methinks1776 September 11, 2011 at 8:48 pm

:)

Pom-Pom September 12, 2011 at 12:08 pm

While some grant government the cause of wealth increase, I say wealth increased in spite of government.

Ingenuity includes working around the stupid stuff the government does.

EG September 11, 2011 at 12:24 pm

So what you’re saying here is, that since a small deficit (comparatively) was such a good thing in the 1930s (and we all know it was, and it led directly to the…read above…greatest GDP growth this country has ever known!…no less!), we should be running much larger deficits today? I am understanding this correctly, aren’t I?

Seth September 11, 2011 at 2:02 pm

I believe what he’s saying is Pearlstein has his facts wrong.

EG September 11, 2011 at 3:23 pm

I was joking

steve September 11, 2011 at 3:15 pm

“greatest GDP growth this country has ever known”

Of the 20th century. Reading is hard.

Steve

Invisible Backhand September 11, 2011 at 12:46 pm

“When the depression reached worldwide dimensions toward the end of 1930, Hoover failed to respond freshly to the crisis. He relied principally on increased public works and a balanced budget—timid answers to what by 1931 was obviously a disaster…In 1932, Hoover continued to adhere, at least publicly, to the economic orthodoxy of a balanced budget. So did Congress, where a national sales tax almost passed under sponsorship from the leadership of both parties.”

http://www.presidentprofiles.com/Grant-Eisenhower/Herbert-Hoover-Economic-collapse.html

dsylexic September 11, 2011 at 1:27 pm

wtf? just because it is on the internets doesnt make it true.GIVE ME THE DAMN number which tells you that the budget was balanced.expediture vs revenue.

steve September 11, 2011 at 3:25 pm

1929 Rev 3,861 Outlays 3,127

1930 Rev 4058 Outlays 3,320

1931 Rev 3110 Outlays 3,577

1932 Rev 1924 Outlays 4659

The initial response was a balanced budget. Then, in 1931, there was a 25% drop in revenue, coupled with a 10% increase in expenditures. 1932 saw large drops in revenue and an increase in spending. 1933 saw big increase in GDP.

http://www.whitehouse.gov/omb/budget/Historicals/

Steve

Dan J September 11, 2011 at 4:07 pm

Could that drop in revenue have something to do with the tax rate increase from 25% to 63% ?

steve September 11, 2011 at 4:39 pm

Always hard to determine cause and correlation, but let us look at what happens to revenues with that 63% rate.

1933 Rev 1,997

1934 Rev 2,955

1935 Rev 3,601

In 1936 top rate was increased to 79%

1936 Rev 3,923

1937 Rev 5,387

If increasing the top rate had any negative effect, it was very temporary.

Steve

Kirby September 11, 2011 at 7:29 pm

Now please list the obligatory Outlays from 33 to 37?

steve September 11, 2011 at 7:52 pm
Methinks1776 September 11, 2011 at 8:02 pm

Very good, Steve.

However, one mistake you’re making is in trying to correlate the published top marginal tax rate and that’s a mistake.

One of my finance professors used to wisely repeat “you can’t eat earnings”. Government can’t eat the top marginal tax rate because that is not what was actually paid in taxes.

The tax rate on which you should be running your thought experiment on is the effective tax rate because that people actually paid

The effective rate was much lower thanks to the endless loopholes introduced into the tax system to, you guessed it, reduce the incentive effect of high taxation.

Ask yourself: would you give up time with your family or any other pleasurable, fulfilling activity you can engage in to earn the next dollar if you only got to keep $0.10 or even $0.23? That’s the decision people who taxed 90% in the fifties and 78% in the 70′s faced.

For example, tax loopholes (a maze of deductions) brought the effective top marginal tax rate to 37% in 1979 when the published top marginal tax rate was 78%.

Stone Glasgow September 11, 2011 at 11:48 pm

Actual government income from income taxes is and has always been between 15 and 20% of GDP.

Invisible Backhand September 11, 2011 at 12:56 pm

From the same article:

“Romney claims his own plan will create 11 million jobs in his first term — not 10, not 12, but 11 million.”

and

“My favorite, though, is a proposal, backed by nearly all the candidates along with the U.S. Chamber of Commerce, to allow big corporations to bring home, at a greatly reduced tax rate, the more than $1 trillion in profits they have stashed away in foreign subsidiaries.

“Repatriation,” as it is called, was tried during the “jobless recovery” of the Bush years, with the promise that it would create 500,000 jobs over two years as corporations reinvested the cash in their U.S. operations. According to the most definitive studies of what happened, however, most of the repatriated profits weren’t used to hire workers or invest in new plants and equipment. Instead, they were used to pay down debt or buy back stock.”

So, when the Obama admin tries to predict job growth of 50,000 a month, it’s ‘scientism’, but never when Republicans try to predict job growth?

Emil September 11, 2011 at 1:28 pm

1) it is scientism both when republicans and democrats claim that they will create X amount of jobs.
2) it is not necessarily scientism saying that your politics will improve the incentives for job creation and that this will lead to the creation of some jobs

dsylexic September 11, 2011 at 1:29 pm

you are a dolt to think anyone is a fan of republicans here.go away ill informed troll. the closest anyone comes to getting half an applause here is ron paul for his sensible talk.no time for mittster or perrtprattle.begone

The Other Tim September 11, 2011 at 5:38 pm

Give up. For certain people, “Republican” and “conservative” may be used as shorthand for “not Democrat” and “not statist-liberal.” You can’t straighten them out.

Dan J September 11, 2011 at 2:00 pm

Problem is that Obama admin has fabricated many myths and lies. For many, Perry and other candidates have yet to make statements on predictions that have been put to the test.
Lie to me once, shame on me. Lie to me over and over and over and over and over……. And have your prophecies rebuked by practicality……. Shame on you.

SweetLiberty September 11, 2011 at 2:21 pm

Here is a lesson I tried to teach Muirgeo, but apparently you need it too…

Libertarians DO NOT equal Republicans.

Try to remember that.

Invisible Backhand September 11, 2011 at 3:24 pm

Denounce Fox News and Rush Limbaugh and I might consider your opinion.

Rick Caird September 11, 2011 at 5:21 pm

“Denounce Fox News and Rush Limbaugh and I might consider your opinion.”

Was that lifted verbatim from McCarthy or have you added your own spin? As I recall, the requirement to “Denounce” was also endemic to Russia.

Invisible Backhand September 11, 2011 at 5:58 pm

It’s more of a shibboleth. You didn’t pass.

http://en.wikipedia.org/wiki/Shibboleth

SweetLiberty September 11, 2011 at 6:24 pm

IB,

Neither Rush nor Fox nor the NY Times, nor CBS news is always right or always wrong. Every source should be taken through a filter.

Do you view your news sources with skepticism? So far, I haven’t seen evidence of that – you and Muirgeo buy into any extreme left data or chart hook-line-and-sinker and parade it around as definitive evidence.

The left is just as guilty (if not more so) of distributing propaganda to further their cause. Again, don’t be so gullible and believe everything you read and maybe I’ll start considering your opinion – if and when you start to make sense.

Invisible Backhand September 11, 2011 at 7:07 pm

This from the guy who said the chart needed ‘another’ oil column.

SweetLiberty September 11, 2011 at 7:16 pm

Um, you advocated for an oil import category on “Questions About Imports” – not me. Is this really all you got? Calling me on a typo? Wow, you are even more lame than I thought IB. Competing with Muirgeo now for weakest arguments on the board? Today, you win!

Methinks1776 September 11, 2011 at 7:29 pm

Seems “more so” is the right answer, SL

UCLA professor Groseclose research on the subject concludes:

Among his conclusions are: 1) all mainstream media outlets have a liberal bias, and 2) while some supposedly conservative outlets—such as the Washington Times or Fox News Special Report—do lean right, their conservative bias is less than the liberal bias of most mainstream outlets.

http://mjperry.blogspot.com/2011/09/does-media-have-liberal-bias-is-there.html#links

The other Tim is right, though. Everyone not a Democrap or a statist liberal is someone to destroy. If you don’t submit willingly to the tyranny, you’ll submit unwillingly at the point of a gun or worse. The orcs are so filled with seething jealously.

SweetLiberty September 11, 2011 at 10:35 pm

Good link. Thanks.

samgrove September 11, 2011 at 7:51 pm

I never listen to Limbaugh or Fox News, so I have no basis for denouncing either.

Methinks1776 September 11, 2011 at 8:09 pm

Then your name will be registered in “the book” and when Visible Brain Death’s leader rises to power you will be shipped off the the Govcamp. That is all.

(“Gulag” is a shortening of Gossudarstvinii Lager. In English “Government Camp”. Thus the English equivalent to Gulag would be Govcamp. Seems such a benign name.)

vikingvista September 11, 2011 at 10:14 pm

Woohoo! I’m going to camp!

Dan J September 12, 2011 at 1:17 am

Try to concentrate while at
camp.

Dan J September 11, 2011 at 2:24 pm

Trying to elevate the position of the man who kicked the dog by pointing out the man who kicked the cat, does not work. They are both to be despised.

Kirby September 11, 2011 at 7:34 pm

nah, dogs are nicer.

Dan J September 11, 2011 at 2:26 pm

Moderation? Is it random?

No links.

Trying to elevate the position of the man who kicked the dog by pointing out the man who kicked the cat, does not work. They are both to be despised.

Dan J September 11, 2011 at 2:27 pm

Try it again..

Trying to elevate the position of the man who kicked the dog by pointing out the man who kicked the cat, has no value. They are both despicable.

` September 11, 2011 at 7:35 pm

That happened to me. You have to wait about 5 minutes, refresh the page, and see if it is up.

CatoTheElder September 11, 2011 at 3:19 pm

You just don’t get it, do you? Who cares about facts? The important thing is the narrative. Perception is reality, and the common perception is that Hoover was a hardhearted fiscal conservative who did not care at all about those people in those Arthur Rothstein and Dorothea Lange photographs.

Hoover’s truly heroic and private humanitarian work during World War I is unknown by virtually all Americans, though it is still recognized in Brussels where a major avenue was renamed in his honor. This fact is also inconsistent with the narrative and ignored in the standard texts.

Of course, facts are troublesome when they conflict with a particular narrative. Austrian-school libertarians ignore the fact that Hoover was against “the proposals for inflation of the currency” and “tampering or inflation of the currency” (2/18/1933 letter to FDR) as much as American liberals ignore the fact of Hoover’s many economic interventions. In the same letter, Hoover also advised FDR to re-assure the nation that “the budget will be unquestionably balanced even if further taxation is necessary”.

George Leef September 11, 2011 at 5:53 pm

I think the mystics are those who continue to believe that politicians and central bankers know how to put resources to more productive use than if they were left to competition in the free market. People like Pearlstein have been led to believe that there is something deeply sophisticated in the models and equations dear to the Keynesians, but political decision-making is prone to wasting labor and capital. Solyndra is just the most recent example.

kyle8 September 11, 2011 at 10:48 pm

The problem George, is that now in days they are so ho hum about their blatant theft that they do not even pretend anymore to put the money to some productive use.

If it was actually used for things like infrastructure, in a half way efficient manner, then I would not like it, but I could live with it.

But everyone knows by now that they are only going to keep spending on unions, lawyers, shadowy groups like Acorn, and all the other party apparatchiks. It is just a giant slush fund.

Theft on a truly giant scale.

George Leef September 12, 2011 at 6:22 am

Even government spending that’s called “infrastructure” is almost always inefficient, due to prevailing wage laws and other special interest provisions, and frequently the projects themselves are a waste, such as the proposed subway in San Francisco that has been much discussed of late in the Wall Street Journal. Officials in Washington say it will be good; people there in SF realize that the planners have understated the costs and overestimated the benefits.

vidyohs September 11, 2011 at 6:45 pm

For those who believe in the mysticism and magic contained in the phrase, “Don’t worry, there will always be someone to steal from”, to point to others and call them mystics for believing in the phrase, ” God helps those who help themselves” just once again reveals the hypocrisy of the looney left.

nailheadtom September 11, 2011 at 10:50 pm

Pearlstein can’t come up with a coherent thought in that ridiculous assemblage of verbiage. He calls increased government regulation of cement plants ” the dynamic quality of economic interactions.” More draconian government simply increases economic opportunity, right?

“One of them is even talking about repealing the 16th and 17th amendments to the Constitution, allowing for a federal income tax and the direct election of senators — landmarks of the Progressive Era.” Count me in on both repeals, along with a substantial number of other citizens.

“they wouldn’t mind abolishing the Federal Reserve and putting the country back on the gold standard.” No, they wouldn’t. The Federal Reserve has done such a bang-up job regulating the monetary system since 1913 that we can hardly function without them, at least according to the member banks they keep bailing out. And the gold standard seems to have survived in one form or another for several millenia. And if the gold standard doesn’t make any sense, why did Nixon take us off of it because all our gold was being redeemed? If the gold standard is meaningless, why do we need any at all?

Terry Noel September 12, 2011 at 8:21 am

Outstanding point, Don. One wonders what evidence would suffice to Keynesians to alter their position in the least.

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