The Corner

NYT Laments the Failure of a Doomed Policy

The New York Times got it half-right. Friday’s jobs report was highly discouraging, causing the Times to reflect that “there’s just no positive spin for this.” And you’d better believe they tried.

In July, there were 131,000 jobs lost, and the unemployment rate held steady at a worrisome 9.5 percent only because so many potential workers are giving up and leaving the workforce entirely — all adding to the perception of a “dissolving recovery.”

The Times complains the Washington policy response has been “inadequate, at best,” and tsk-tsks that a puny little $26 billion spending bill to bail out the teachers’ unions was all the Congress could muster.

Alas, the reality is that our options today are few and pitifully timid. Obama’s New York Times–endorsed spending surge has left us with a weak and faltering economy, and, with budget deficits of such massiveness, there is little room for new policy.

Even so, the Times wants to continue with more deficit spending. And when that, too, fails, the response will be — even more deficit spending.

To be fair, much of the economics profession has embraced the once-dead Keynesian theory of stimulus spending. Hopefully, after a few years and a few trillions of dollars of government debt, the profession and the Times will have the courage to acknowledge that Keynesianism has once again failed.

Keynesian fiscal stimulus is fiscal alchemy, whereby debt is meant to turn into prosperity. It’s based on the simple notion that the government, through borrowing and spending, can transfer a dollar from one account to another and somehow have a dollar more than at the start. Government borrowing must come from somewhere. Where? Dollars borrowed by Uncle Sam would otherwise have been invested by Sam’s Club, or Sam’s carwash, or maybe by Sam down the street to buy a new car.

It’s not that the economy can’t recover strongly. American workers are still industrious. The entrepreneurial spirit is alive and well. And perhaps most importantly, businesses are sitting on growing mounds of cash just waiting to be put to productive use, and opportunities abound. If unleashed, this cash would launch an investment boom that would drive the unemployment rate down.

Why are businesses not investing? Growth-inducing investment is about the future: faith in the future; hope in the future; profits in the future. Obama’s policies have created so much uncertainty and lack of confidence in the future that the prudent course is to wait and see.

Confidence is the missing ingredient in the economy and financial markets. Obama’s policies erode confidence. The policies the New York Times embraces erode confidence. Another few hundred billion in government debt is certainly not going to inspire confidence.


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