“In so far as a scientific statement speaks about reality, it must be falsifiable; and in so far as it is not falsifiable, it does not speak about reality.”
According to Whitehouse.gov, happy days are here again, and Barack Obama is pretty much The Fonz! You see, The Executive Office of The President’s Council of Economic Advisors has released a report entitled “THE ECONOMIC IMPACT OF THE AMERICAN RECOVERY AND REINVESTMENT ACT FIVE YEARS LATER.” Therein they make the claim that neither the Progressive economic policies embodied in the 2009 Stimulus; nor the Keynesian Theory that serves as its gravamen, have gone so far as to jump the shark. Disappointed Americans point out the all of the glowing statistics never quite seem to add up to any measure of personal happiness or fulfillment. But this misses a key element of the debate. The Keynesian Economic Theory is a control mechanism instead of a legitimate economic theory.
Barack Obama’s flying circus of economic advisers write lyrical and persuasive re-election propaganda for man already barred from further terms by Constitutional limits. The post-modern heirs to Leni Riefenstahl describe Barack Obama’s triumph below.
President Obama took office in the middle of the worst economic crisis since the Great Depression. In the previous year private employers shed 3.8 million jobs. Trillions of dollars of household wealth had been wiped out, and the economy’s total output, as measured by real gross domestic product (GDP), was in the midst of its most severe downturn of the postwar era. In the face of this crisis, the President took immediate, bold, and effective action. Five years ago, on February 17, 2009, less than a month into his first term, President Obama signed into law the American Recovery and Reinvestment Act of 2009, also known as the Recovery Act, or ARRA. Thanks in significant part to the actions of President Obama, the economic picture today is much brighter. GDP per capita started expanding in the third quarter of 2009 and reached its pre-crisis level in nearly four years, considerably faster than the historical record suggests is the typical pace of recovery following a systemic financial crisis.1 Since 2010, the U.S. economy has also consistently added over 2 million private-sector jobs a year, bringing the overall unemployment rate down to its lowest level since October 2008.
So the Brave and Noble Robin Hood took from the Rich, gave to the Poor and saved the long-suffering burghers of quaint and homely Nottingham from ruin and depredation. If the rigorous academics who composed this white paper had delved any further into hagiography, they would have had added cover art featuring the angel touching Barack Obama’s outstretched finger. Our current administration’s Council of Economic Advisers will have no trouble finding lucrative work in the advertising sector after their federally-funded gravy trains reach the terminal station.
There is a counter-hypothesis that argues the government just arbitrarily redirected vast sums of money that would have more efficiently augmented the commonweal had they been controlled by competent hands. If stipulates that every dollar redistributed by government comes at an opportunity cost to society dependent upon what the previous owner of that money would have used it for. This doesn’t mean that a stimulus couldn’t necessarily succeed; but it does imply that just pointing out that there was a stimulus; and a then a recovery does not ipso facto prove that the stimulus caused said recovery. Causation needs to be established independent of fortuitous correlation.
The problem betiding the debate is one of choosing a metric to test the miraculous claims made on behalf of Saint Barack The Stimulator. Point out that the percentage of able-bodied adults of appropriate working age actually employed is at the lowest mark in nearly a century, and the Keynesian Hallelujah Chorus will adjust their pitch and sing of a declining U3. Point out that this declining U3 is still 2% above what the policy actually promised when it was pitched to a credulous lap-dog Congress; and we hear sad tales of how much worse the poisoned fruits of George W. Bush really were than originally believed. The goal posts move so frequently that Garo Yepremian could never have split the uprights.
Since Keynesian Economics can never be objectively evaluated next to any unchanging metric; it therefore doesn’t legitimately qualify as a legitimate intellectual body of theory. Pace Karl Popper; that which you can never test; you cannot legitimately hypothesize. So why then does Keynesian Economics still exist? Simple. It makes certain people feel good. To understand the thrill running up the Statist central planner’s leg, we must understand some aspects of just what John Maynard Keynes proposed.
Keynes dispels the notion that any private investor could know how to utilize money better than an organized central state. The opportunity cost problem is sprinkled with holy water and exorcised through a thoroughly efficient begging of the claim. This a priori sleight of hand prevents any meaningful questioning of who’s spending should be optimized to stimulate GDP. This brushes aside non-normative questions as to whether the government should be confiscating and redistributing vast sums of money.
Keynes furthermore deliberately derides the moral righteousness of any citizen earning passive income. He describes a optimal state of existence where passive investment income becomes an impossibility and describes it as “The Euthanasia of The Rentier.” We examine a short passage from Keynes’ “The General Theory of Employment, Interest, and Money.”
The justification for a moderately high rate of interest has been found hitherto in the necessity of providing a sufficient inducement to save. But we have shown that the extent of effective saving is necessarily determined by the scale of investment and that the scale of investment is promoted by a low rate of interest, provided that we do not attempt to stimulate it in this way beyond the point which corresponds to full employment. Thus it is to our best advantage to reduce the rate of interest to that point relatively to the schedule of the marginal efficiency of capital at which there is full employment.
Parsing the densely-worded prose with an analytic chain-saw, we discover that “The Euthanasia of The Rentier” is essentially no more than “The Euphemism of The Confiscator.” Keynes is calling for a deliberate, calculated attempt by the state to destroy all incentives to save and plan for the future. This would stimulate the economy to what Keynes hoped would be a profitably hyper-kinetic present. It crowds out the fundamental process by which Capitals accumulate the motive power to form new enterprise.
This posits the government in the role of an economic Savior-State and the relative empowerment of the state in comparison to the Capital or the mass of individuals completely obliterates the ability of consumers to do much more than brainlessly spend. On paper, you get Recovery Summer. To the Totalist, this is what recovery looks like. This supposed recovery comes at the expense of free action and prudent foresight. The grass-hoppers binge and the ants get the bug juice.
Contrary to the scaremongers; this equilibrium doesn’t necessarily even have to decay from its meta-stability for a long, long time. Positing a Metternich’s Peace at the expense of individual liberty through Keynesian Economics, we get the true reason that so many powerful leaders in Washington, DC knowingly continue abetting the fundamental Keynesian delusion. Morphius, from the movie “The Matrix,” best describes what Keynesianism ultimately accomplishes.
When The Thinking Conservative approaches debate with The Keynesians, that person should not get side-tracked into arguing results. The hypothesis is deliberately beyond the realm of falsification and actual economic performance is a sideshow distracting from why Keynesians are Keynesians. The ultimate economic, moral, cultural and societal stimulus is individual liberty. That individual liberty is euthanized in synonymy with the rentier. The debate over Obama’s Stimulus and Keynesian Economics in general is moral rather than statistical.