When Bright People do Stupid Things
by Tom Donelson on August 22, 2011 at 7:55 PM
"The famous Notre Dame Football coach Knute Rockne was lecturing his fighting Irish, many of whom were of Irish descent. During the conversation Rockne, a Norwegian immigrant, stated that there is nothing dumber than a dumb Irishman, to which a young Irish man in the back yell backed, 'Yes there is someone dumber than a dumb Irish man; a smart Norwegian!' Rockne, stunned at the young man quip for a brief few seconds, broke out laughing.”
We are presently afflicted with very bright people who believe in some very stupid ideas. Most recently, Wall Street Journal writer and economist Stephen Moore relayed an exchange between Obama's press secretary, Jay Carney, and a Wall Street reporter. When the reporter asked how increasing unemployment insurance creates jobs, Carney laid out the typical Keynesian idea, "I would expect a reporter from The Wall Street Journal would know this as part of the entrance exam just to get on the paper… unemployment insurance is one of the most direct ways to infuse money into the economy because people who are unemployed and obviously aren't earning a paycheck are going to spend the money that they get . . . and that creates growth and income for businesses that then lead them to making decisions about jobs—more hiring."
Stephen Moore noted the absurdity of this comment when he wrote, “That's a perfect Keynesian answer, and also perfectly nonsensical. What the White House is telling us is that the more unemployed people we can pay for not working, the more people will work. Only someone with a Ph.D. in economics from an elite university would believe this.”
The secretary of Agriculture, instead of being ashamed that we have more people collecting food stamps, claimed that the multiplier effect of having increasing number of people with food stamps is great for the economy. The logic of Keynesian economics on steroids has been interpreted by this administration and its follower in the media and academician as meaning the only job worth having is a government job or a government-produced job, and if that doesn't work, it is better to collect welfare and food stamps since obviously it is great for an economy to have everyone on the government trough. (Of course this leaves out the equation of who pays for all of this.)
The IRS has shown that the number of millionaires has declined and the revenues collected from millionaires and billionaires have been reduced. At a time that Obama and his ilk have decided to make raising marginal tax rates on the wealthy as part of their central proposal; the wealthy in America are disappearing! Margaret Thatcher once observed that the problem with socialism is that you run out of somebody else's money, and now our productive class is running out of money to pay for the welfare state.
Logic and history have already shown how to escape a recession: lower the cost of doing business by reducing regulations, lower marginal tax rates, solidify the dollar and reduce government spending in real terms and as percentage of GNP. Obama has allowed the dollar to decline, which explains the run up in Gold, increased the cost of doing business by passing new entitlements, much of it paid by businesses through mandates or increased taxes, and threatened to raise not just the taxes of the wealthy, but the marginal tax rates, which represent an increase in cost for additional work. Least we forget, Obama has increased government spending in real terms and as percentage of the GNP to levels not seen since World War II! He has done everything you are not suppose to do to get out of a recession, and now we have trillions of dollars of new debts and trillion dollar deficits, plus a weakened dollar and a Fed with very few weapons to keep the economy going!
We are witnessing stupidity in running our economy by smart people who should know better but don’t. If you want to know why the market is reacting the way it has over the past two months, it is because investors have realized that smart people are under the influence of some very stupid ideas! In Europe, the end of the welfare state has come crashing down as the German people are rebelling against the idea that their government needs to be bail out the rest of the continent for their profligacy while the average German sacrifices his or her hard work for others who simply want to enjoy the fruits of their welfare state. The gig is up, but yet we have politicians who view Europe as their model and only want to repeat the disaster that is engulfing Europe.
Obama and the Democrats will campaign on the idea that we saved America from a Great Depression and the recent turmoil is merely a string of bad luck. Yes, Obama inherited an economic mess, but he made it worse and delayed recovery. He did not save us from a Great Depression but prevented a great recovery.
To paraphrase Knute Rockne's story, “What is dumber than a dumb conservative? A smart Liberal.”