"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Tuesday, June 7, 2011

They Don't Know What They're Doing

For the most part, government intervention in the economy is always bad.  It distorts the market, shifting resources from productive uses to unproductive uses (through subsidies), penalizing certain decisions (through taxation), adding expenses and hence increasing prices (through regulation), and generally disincentivizing investment and entrepreneurship (by creating uncertainty, since no one can predict what the government may or may not do).   The premise of government intervention is that they know better, through science, and specifically economic science, how to generate growth.   But they don't, and nothing proves this point better than the predictions by White House economic advisors about what would happen in the aftermath of the February 2009 stimulus.   Here is the real unemployment data layered over a chart prepared by White House economists Jared Bernstein and Christina Romer that predicted the stimulus would keep unemployment below 8%, and that unemployment by the middle of 2011 would be well below 7%.   As we know, the unemployment figure for May 2011 was 9.1%, and headed back up.  

In other words, these elites, these Ph.D's, these geniuses, spent a trillion dollars of our money on a theory that now has been proven wildly wrong.   They didn't know what they were doing.

Indeed, using their own logic, this chart suggests that the stimulus package may have caused higher unemployment.   Could this be true?   Actually, maybe so... the idiocy of the package coupled with the additional trillion dollars in debt we took on to finance it may have spooked investors and business owners so that they simply have "gone Galt" for the past two years.   Hard to have confidence when our leaders don't know what they're doing.  

We have built up this tremendous plaque in the body politic made up of government distortions in the market.   It would take serious medicine now to clean that plaque out and get back to full strength.  

1 comment:

  1. Sir, I just discovered and have it bookmarked. I think I found my way here from a comment you made on another blog which I found at http://www.bookwormroom.com/ .

    This particular post is the most compelling evidence I have read on why no one should vote for Obama again.

    Thank you for blogging.