Saturday, October 23, 2010

Who Would Take Advice from Her?

Romer, late of the White House, has a piece in the NY Times stating that we should disregard the Tea Party, and take her advice, after all she has been right ever since she got to Washington and then left, correct? No!

She states:

THE clamor to cut the budget deficit is deafening. Blue Dog Democrats, Tea Party Republicans and doomsday economists are calling for immediate action. And the demands for austerity coming from abroad are even louder.

She continues:

So, the question is not whether we need to reduce our deficit. Of course we do. The question is when...Now is not the time. Unemployment is still near 10 percent in the United States and in Europe. Tax cuts and spending increases stimulate demand and raise output and employment; tax increases and spending cuts have the opposite effect. This is a basic message of macroeconomics and a central feature of public- and private-sector forecasting models. Immediate moves to lower the deficit substantially would likely result in a 1937-like “double dip” as we struggle to recover from the Great Recession.

Now we must remember that she was the person predicting what the Stimulus would do and she was the person who chuckled each time she explained why her latest projections failed. What in God's name would incent any human to take her advice now! This is a person who never once said that despite the facts that she may have made an error. She now wants to just push on the pedal and drive the truck over the cliff.

She states:

Taking budget actions now that would further increase unemployment would be not only cruel, but also short-sighted. The longer unemployment remains high, the more likely it is to become permanent as workers’ skills deteriorate and they gradually drop out of the labor force.

The problem for the west coast magician with numbers is that the economy is stalled because of government. Money is being sucked out of the economy by the banks and the FED and the new tax plans not to mention health care and the like. Government does not create jobs, unless you think a government worker provides any value to the economy. Government takes capital which could best be put to use in the private sector. We now have one government employee per two real value creators and as we have shown it is getting worse by the month!

So what should one do. Given the fact the she has been wrong all the time over the past two years, perhaps we should do whatever she opposes. At least there is some logic to that plan.