Politicians are no economists

The News Virginian / News Virginian
Published: January 27, 2008

So Republicans and Democrats in Washington actually can agree on something. Since Democrats took over the House, America's bickering parties have concurred only on where to show up for work. That is, until they reached a stunningly peaceable accord this week on an economic stimulus package.

Politically speaking, they could hardly go wrong offering $150 billion in tax breaks to consumers and businesses. For a politician, deciding to hand back $300 apiece to Americans must be as simple as deciding whether to accept the money. What's to think about-

Well, perhaps plenty.

Few will complain about the government returning a small portion of the money it has confiscated from Americans' paychecks. We suggest that a better option would be for the government to take less in the first place, but we will not quibble over how the money makes its way into taxpayers' pockets.

But in the case of rebates, the devil is in the details, specifically what the government hopes to accomplish through its stimulus package and by what means. The legislation springs from a branch of economic philosophy that advocates government intervention to right a slumping economy or to restrain one that is especially, or exceedingly (depending on one's perspective), bullish.

That intervention in times like these, with the economy on the precipice of recession, generally equates to more government spending and a swelling deficit. The thinking goes that in good times, government spending can be reduced and the deficit narrowed. Of course, that notion works out better in textbooks than in reality.

America's federal deficit widened in the 1970s from a small gap to a chasm and continued growing until President Clinton, of all people, built a surplus, largely at the behest of an opposition party buoyed by the Republican Revolution of 1994.

Economist John Maynard Keynes is the father of interventionist government. He gets credit for the government jiggering of President Franklin Roosevelt, who, in turn, gets credit for pulling America from the depths of Depression. Of course, there was the little matter of soaring wartime production, which, we can assume, played some part in awakening the U.S. economy.

Keynes' macroeconomics has driven policy not only here but around the world for the last half-century. The successes of that period are many, from the reconstruction of Europe to the surge of Asia. But as America helped rebuild the world, it also lost much of its sense of self as the place where the best and finest products were made by a superpower of a work force to one that relies on other countries for much of what it needs.

Those of Keynes' philosophical ilk deny that the market can be counted upon to fix itself, insisting instead that brighter, singular minds in government should be employed to keep financial affairs aright.

We are not economists and are by no means prepared to match wits with Keynes. Still, we cannot help but notice that American ingenuity propelled us to prosperity before anyone here knew anything about macroeconomics. Much of that ingenuity, at least in the realm of manufacturing, has drifted to other places, while our government leaders have focused on controlling economic externals. We are not so sure America is better off.