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Collective Lunacy: Obama/Bernanke Can't Learn Econ Lessons

If there has been a side benefit of having to endure and court the serious dangers of what has surely been the most radical first two years of an American presidency since Franklin Delano Roosevelt (possibly more so by the time the historical dust settles), it’s that so many leftist pundits and others who have made careers of attempting to pose as supposedly reasonable people have revealed that they are on the wrong side of the lunatic line.

One such person is Peter Beinart. He often tries to come across as levelheaded, as in this snippet from a Daily Beast critique of Jon Stewart’s late-October Washington rally:

The Tea Partiers, in other words, are making a serious argument, which the left too often tries to dismiss by calling them nuts.

Even in that column, though, Beinart gives off a heavy clue that he’s not too impressed with the origins of the country in which he lives:

They’re tapping into a deeply-rooted American fear of government power. … And in the process, they’re conjuring, once again, the myth that America was born free, and surrenders a smidgen of liberty every time Washington imposes another tax or establishes another government agency.

That’s no myth, as anyone who has dealt with employment law or existing health care regulations — let alone what’s impending if ObamaCare is allowed to kick in — would tell you.

Beinart went code red in the wake of Tuesday’s election results, which as of this writing had Republicans picking up six U.S. Senate seats, gaining 60-plus House seats and a congressional majority, and achieving historic domination in state capitals:

… rather than looking at what those other countries are doing right, the Republicans have taken refuge in an anti-government ideology premised on the lunatic notion that America is the only truly free and successful country in the world. That ideology won last night, and Keynesianism lost.

As tempting as it would be to do a riff on Beinart’s miscasting of the sensible conservative take on freedom and success, I’ll mostly resist, simply because nobody I know of or have read is claiming that the U.S. is the “only free and successful country.” They do correctly assert that it has historically been the most free and successful — well, at least until what I have been calling the POR (Pelosi-Obama-Reid) economy took root in mid-2008.

Beinart has somehow missed the news that Keynesianism has suffered at least three big losses in the past 80 years. The first occurred in the 1930s, beginning under Herbert Hoover and then proceeding on steroids during FDR’s New Deal. This is an era appropriately characterized in retrospect as the “Stuck on Stupid” decade. UCLA professor Lee Ohanian notes: “[P]rivate-sector job growth did not come back under Roosevelt.” The unemployment rate was 17% at the end of the decade. Meanwhile, the jobless rate throughout Europe during the 1930s was consistently lower.

The second big loss for Keynesianism occurred in Japan during the 1990s. Government debt as a percentage of annual economic output soared with repeated attempts at stimulus, while economic growth was and has continued to be anemic. All that has resulted from this massive overindulgence was what many have referred to as a “zombie economy” and a populace that even the spend-happy New York Times described in mid-October as having gone “from dynamic to disheartened.”

If what happened in Japan is starting to seem familiar, it’s because we’re living in the midst of Barack Obama’s and Ben Bernanke’s multitrillion-dollar stimulus. There is no doubt that it represents Keynesianism’s third big loss:

• In the first five quarters after the 2008-2009 recession officially ended, the economy has grown only 3.5%; during the first five quarters of the tax cut-driven recovery under Ronald Reagan, whom Beinart would probably also throw into the “lunatic” category, the economy grew by a “crazy” 7.8%.

• Under Obama/Bernanke, the economy has in five quarters only recovered about 80% of what was lost during the four quarters of the recession as normal people define it. Under Reagan, the economy recouped previous losses by the end of the recovery’s third quarter, and kept going strong.

• Under Obama/Bernanke, the official seasonally adjusted unemployment rate has been stuck at 9.4% or higher since the recession ended. Under Reagan, whose policies didn’t take meaningful effect until late 1982, the rate dropped from 10.8% at the end of that year to 7.3% at the end of 1984.

Keep in mind that the Obama/Bernanke stimulus has taken three forms: the stimulus plan passed by Congress in February 2009, massive increases in government spending beyond the stimulus, and Ben Bernanke’s quantitative easing. Together, they have amounted to at least $3.5 trillion since Obama took office. Also note that if nothing is done, we are already on a crash Keynesian course. Under the current policy structure, even using overoptimistic assumptions, annual deficits in future years are on track to exceed $500 billion as far as the eye can see.

So what do Beinart, James Fallows (who brazenly asserted on NPR that “there is essentially no disagreement whatsoever” among economists on this matter), Paul Krugman, and all the self-appointed smarties want to do? You guessed it: even more stimulus. Sadly, they’re already getting their way before Congress reconvenes, as Ben Bernanke has announced $600 billion more of “money from nothing” quantitative easing. But even that’s not enough for these guys.

It hasn’t worked to this point. It historically hasn’t worked. As noted, it’s still being done, and it’s still not working. Countries like Germany, which resisted Obama’s clarion call to keep stimulating, are growing nicely. Yet our leaders and their apparatchiks want more.

Geez Peter, Paul, et al, to find people holding lunatic notions, all you need to do is either look in the mirror, or over at 1600 Pennsylvania Avenue.