If it Quacks Like a Recovery?
The Free Agent conveyed her surprise to a friend the other day—the federal government’s economic indicators—corporate profits, GDP, net investment—all point to an economy catching a trade wind, finally, out of the doldrums. This seemed to contradict lots of her experience, stubbornly-high unemployment (even allowing for employment to be what economists call “sticky”, employers believed to be slow to fire, then slow to hire, as business cycles change), and persistently low interest rates, which discourage investment. The friend, let’s call him Nude Eel, said, “That’s because the stimulus plan is working. I have to agree with the economists who are saying it’s time for a second round of stimulus. You can’t argue with history,” he continued, “Franklin Roosevelt was no Keynesian, but he did stimulate the economy with deficit spending. Then he stopped in 1936, but as soon as they stopped, the economy stopped flourishing and we had the second depression of 1937. So sometimes you have to keep priming the pump.”
The FA hears this circular reasoning a lot—in order for economic indicators to be healthy, there has to be a lot of intervention in the economy. When she opened her mouth to rebut her friend Nude, she realized he was perfectly right. If you want to raise the saline level at the mouth of a river, unload the Morton’s truck upstream. So where’s the problem? If economic indicators are bright, the economy will turn bullish, as the Dow has, and recover. If indicators are gloomy, the depression continues. Isn’t it a win-win?
The Free Agent spent enough time in the country as a youth to know if you have to keep priming the pump, it means your well is dry. The most-excellent reason magazine article traces all the so-called “green shoots” to the federal government’s meddling. The great harm is the most valuable commodity in any endeavor—information—is obscured. Where should you dig your new well and how deep, where are the growth areas in the economy? This information points the way toward true economic recovery, which has to be enduring enough to pay for all this borrowed water we’re throwing down the hole at the moment.
By anyone’s analysis and by any scale, the kudzu-like growth area of the economy is unsurprisingly, federal government. You and FA may be tightening our belts, but Uncle Sam’s changed into his Thanksgiving sweatpants in order to gorge on a $3.8 trillion meal, almost 40% of which is going on the ol’ credit card. Who’s the winner in all this? Mel Brooks nailed it in 1974’s “Blazing Saddles”. Said his corrupt Governor William J. Lepetomane, “We’ve gotta protect our phony baloney jobs, gentlemen!” Can The Free Agent get a harrumph-harrumph?