“What the world has now reached…is a Keynesian dead end. We are told to let Congress continue to spend and borrow until the precise moment when Mr. Summers and Mark Zandi and the other architects of our current policy say it is time to raise taxes to reduce the huge deficits and debt that their spending has produced. Meanwhile, individuals and businesses are supposed to be unaffected by the prospect of future tax increases, higher interest rates, and more governmental control over nearly every area of the economy.” ‘The Keynesian Dead End’, The Wall Street Journal, June 26, 2010
Let us hope that President Obama and Treasury Secretary Timothy Geithner return from the G8 and G20 meetings in Toronto next week with blackened eyes and bloodied noses delivered by European leaders sick and tired of their fraudulent Keynesian nostrums that currently are clogging the arteries of the advanced nations with fat and bad cholesterol.
Let us further hope that a President who has found a taste for beating up fine generals will lay some solid punches into his retread Keynesian advisors as he runs them out of town. For it is high time to call them out for their failures of economic prediction and the serious harm that their their growth-retarding policies have imposed on regular Americans.
It is important to understand just how academically weak Obama’s leading economic advisors truly are. Lawrence Summers has ridden far on a great pedigree (related to two Nobel Prize winning economists and cloaked in the Harvard label). But he is now far- distanced from serious academic work, preferring instead to relax in the less intellectually pressured world of government and university administration. A lot of his early work quite frankly was pedestrian, much of it co-authored. There is clearly no Nobel Prize in economic Sciences in the offing for his contributions. Christina Romer is no path-breaker either, her best work co-authored with her much more impressive husband. Both Summers and Romer are recent Keynesian retreads, who spent most of their academic careers in the world of rational expectations and New Keynesian economics. Their recent return to the hydraulic Keynesian fold is as mystifying as it is unfortunate for the nation.
Summers was directly involved in Stimulus I, pressing President Bush and Congress for a temporary spending injection of $150 billion for 2008. The government responded with $168 billion in spending and one-time tax cuts. This injection failed to stop the financial crisis and economic contraction of September 2008. Summers and Romer, undeterred by failure, next pressed President Obama hard for Stimulus II early in 2009. The government responded with $862 billion in pork-laden outlays.
Summers and Romer went out on a limb, assuring the public that this spending would hold unemployment in the United States below 8 per cent. What a pair of losers! Seventeen months later, with the United States running a monetary furnace, the unemployment rate hovers at 9.7 per cent, with first quarter growth for the U.S. economy at an anaemic 2.7 per cent per annum, orders of magnitude worse than the Reagan recovery of 1983-84. Still undeterred by repeated failure, Summers and Romer now press for Stimulus III; and President Obama fully supports their nostrums.
Throw these losers out, Mr. President, while you still have time to shift the economic course of this nation towards more desirable waters. If you do not do so, they will surely take you down in 2012, together with the Democratic-controlled Congress that has blindly followed your administration on the road to economic ruin.