Saturday, October 9, 2010

Why IS the Economy So Bad? Part II

Two examples this week of why our economy is struggling.
First, we have this video, of Dick Blumenthal (D) who is running for the Senate in CT. See him here on how a job is created. Warning, this is painful to watch.

Next, we have House Speaker Nancy Pelosi (D-CA-08) telling us that food stamps and unemployment insurance are the way to get the economy growing again.
For every dollar a person receives in food stamps, $1.79 is put back into the economy…It is the biggest bang for the buck when you do food stamps and unemployment insurance. The biggest bang for the buck.
Ah, to be so blissfully satisfied with Keynesian economics. Basically this is just a restatement of the “Parable of the Broken Window”. Unfortunately, what is more accurate is the “Fallacy of the Broken Window” which you can see here.

But back to Madame Pelosi’s specific issue.
First, there’s the multiplier issue. There’s some basis for this multiplier number, but not nearly as much as Keynesians would have you believe.  And it completely ignores the subtrahend in the equation. Even if it’s true that by spending this $1 and having it thus be respent elsewhere adds $1.80 to the economy, it ignores the $1 that was taken from someone else. Actually it ignores the government overhead in taking that money and redistributing it as well. Which might end up adding up to more than the $1.80 you got from the food stamp person.
And, don’t forget, if you hadn’t taken that $1 from the other person, he could have spent it as well, creating that same $1.80 of increase to the economy. Without the subtraction of the government getting involved and passing it around.
Really, it doesn’t take much math skills to figure this out.  My 7 year old (well, she’ll be 7 at the end of the month) was able to understand this.
But, Madame Pelosi can’t. And quite obviously President Barack Obama (D-USA) can’t.
And Dick Blumenthal doesn’t understand how jobs are created. And I seriously doubt that he’s alone in this.
As I said before, the people running our economy, don’t understand economics.
Get out and vote on November 2. Call your friends. Bang on your next-door-neighbor’s door. Get them to vote. The flood needs to take out all these people.
24 days and counting.

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