Freedom Line Blog

This one has to be read to be believed. Nearly three years after passage of the stimulus package, the horror stories of fiscal malpractice continue to emerge. From Reason:

Palladian Partners, a communications firm in Silver Spring, [Maryland has] received $97.5 million dollars in government contracts over the past 12 years. The National Insitutes of Health (NIH), which is Palladian’s biggest client, tacked $363,760 stimulus dollars on to an existing contract, and then followed it with two more awards totaling $431,333. Palladian was to spend the money collecting and disseminating information about how the NIH was spending stimulus money.

And what did NIH get for this money? According to the Reason piece, Palladian’s “main activities have included building a website, and publishing 29 short articles for the site.” That’s over $27,000 per article if you’re playing at home.

In case you missed it, Stephen Moore of the Wall Street Journal explains “Why Americans Hate Economics” with two wonderfully clear paragraphs.

The first explains where economics as a discipline went wrong:

How did modern economics fly off the rails? The answer is that the “invisible hand” of the free enterprise system, first explained in 1776 by Adam Smith, got tossed aside for the new “macroeconomics,” a witchcraft that began to flourish in the 1930s during the rise of Keynes. Macroeconomics simply took basic laws of economics we know to be true for the firm or family—i.e., that demand curves are downward sloping; that when you tax something, you get less of it; that debts have to be repaid—and turned them on their head as national policy.

The second shows where Keynesians err:

The grand pursuit of economics is to overcome scarcity and increase the production of goods and services. Keynesians believe that the economic problem is abundance: too much production and goods on the shelf and too few consumers. Consumers lined up for blocks to buy things in empty stores in communist Russia, but that never sparked production. In macroeconomics today, there is a fatal disregard for the heroes of the economy: the entrepreneur, the risk-taker, the one who innovates and creates the things we want to buy. “All economic problems are about removing impediments to supply, not demand,” Arthur Laffer reminds us.

Knowledge becomes inaccessible only when an influential group decides that reality doesn’t fit their ideal.  The Keynesians have had their day.  It’s time for the proponents of sound money and economic growth to have their turn.

In the Obama era, the news on any given day seems seems like a real-time seminar on the disutility of Keynesian economics and “green energy” faddishness. The latest such entry comes from KOMO-TV news in Seattle, which reports the following:

Last year, Seattle Mayor Mike McGinn announced the city had won a coveted $20 million federal grant to invest in weatherization. The unglamorous work of insulating crawl spaces and attics had emerged as a silver bullet in a bleak economy – able to create jobs and shrink carbon footprint – and the announcement came with great fanfare.

McGinn had joined Vice President Joe Biden in the White House to make it. It came on the eve of Earth Day. It had heady goals: creating 2,000 living-wage jobs in Seattle and retrofitting 2,000 homes in poorer neighborhoods.

But more than a year later, Seattle’s numbers are lackluster. As of last week, only three homes had been retrofitted and just 14 new jobs have emerged from the program.

Fourteen jobs instead of 2,000. That means the Administration’s estimates were off by 99.3%. Since this president is so fond of telling us how much he respects the private sector, how about a few analogies from the real world?

— A baseball player with this level of accuracy would be hitting .007

— A financial adviser with this level of accuracy would have invested $250,000 and ended up with $1,750.

— A doctor with this level of accuracy who saw 850 patients a year would misdiagnose 844 of them.

If you had that baseball player, you’d cut him. If you had that financial adviser, you’d fire him. And if you had that doctor, you’d find a new physician and probably report the old one for malpractice. If you had this president …

The Economist explains how “The Party of No” is most unified around the theme of being anti-Keynesianism.  Keynesianism teaches that government can grow the economy by spending tax dollars to stimulate consumption (i.e. demand).

Rep. Paul Ryan (R-WI) and other Republicans supporting his “Path to Prosperity” budget argue that cutting taxes gives individuals more money to save and invest in production (i.e. supply), the increase of which creates more jobs.

Not all GOP-ers are sold on Ryan’s revived supply-side theory.  Instead, they prefer to focus on spending cuts as a matter of principle.  Come election season, it isn’t likely that voters will support merely cuts.  They’ll want a vision of what the extra money in their pockets can do.

If recent history is any guide, I suspect Paul Ryan will emerge as the main spokesman for the positive vision of limited government.