Friday, August 26, 2011
Come on Irene, there is a Recession to end!
It is about time we had a disaster (other than the election of President Obama) to celebrate. Hurricane Irene has got to be the Keynesian economists dream come true. Think about it. When President Obama announced the $862 billion stimulus bill in 2009 it came on the tailwinds of Larry Summers and other White House economists claiming that the bill would create a 'mulitplier effect' of 1.5. That is to say that for every $1 spent the GDP would rise by $1.50, leading to an estimated $1.3 trillion boost to the economy, a sound recovery and unemployment rates by 2011 of less than 7%. Go look it up for yourself. The Wall Street Journal is filled with valuable articles from that year that put forth the Keynesian plan to end the last recession and have us growing like gangbusters by now.
Oops. Here we are nearly in September of 2011 and all signs are pointing to a 'double-dip' recession. So much for Lord Keynes.
But wait! Now, riding to the rescue will be one of the great opportunities to test another part of the Keynesian orthodoxy - that is that destruction leads to growth when government spends money to fix, among other things.....broken windows.
You remember this, don't you? During WWII Keynes said that, "If expenditure on armaments leads to economic progress, a grand experiment has begun...." What he meant, of course, was that war is good for the economy to the extent that militarism, destruction and rebuilding equates to future government outlays that will boost the economy.
This is why every Keynesian worth his or her salt has to be praying (if they pray) that Irene does not deviate from the path that has it going through Washington, D.C., New York and Boston. Imagine - 60 million residents, fully one-fifth of the nation - lives in this corridor. If we (Keynesian-speaking) can have say, $40 billion in damage, ruined vacations, injured humans and more, then the hospital bills, clean up and post-hurricane rebuilding will help this enormously important region grow by more than the $40 billion in damage - assuming government takes an active role, in all of its wisdom, in channeling tax dollars to non-PORK projects.
As an Austrian economist and follower of folks like Bastiat, I would gladly entertain any Keynesian out there willing to admit that they are hoping for the worst outcome of Irene so that we can get the "best" government has to offer.
I hope to hear from you soon.