As IF Times

link Examiner Editorial: Time to admit that Obamanomics has failed | San Francisco Examiner.

If a San Francisco newspaper questions the policies and directions of the Administration, you know there is unrest among the plain folk.  Christina Romer, the academic who was brought in to chair the White House council of economic advisers has decided to go back to teaching at Berkeley after almost 2 years of poor results in the nation’s economic numbers.  Hmm.

According to Wikipedia, Romer, jointly with her husband David, worked on the study of how tax policies affect economic growth during their academic careers.  No slouch, she received her doctorate in economics from M.I.T.   The net conclusion?

“…Romer and Romer also find “no support for the hypothesis that tax cuts restrain government spending; indeed … tax cuts may increase spending. The results also indicate that the main effect of tax cuts on the government budget is to induce subsequent legislated tax increases.”However, she notes that “Our baseline specification suggests that an exogenous tax increase of one percent of GDP lowers real GDP by roughly three percent…”

I know to most people this is as interesting as the Dewey decimal system, but put very simply, (1) tax cuts can result in higher government spending (eventually) and (2) tax increases reduce GDP by a factor of 3 times according to their work.

While the latter conclusion is rather intuitive and we’ve discussed this in previous comments, the first conclusion is suspect.  No doubt a gripping read, the Romers’ thesis that lower taxes leads to higher government spending implies a rather spurious link (in my opinion )  between the two events.  Government spending always has at its roots, wants, not needs.  Wants are a result of politics and lobbying and to a large degree, prevailing culture.  For example, if someone were to put a number on the amount of government money spent on global warming over the past 5 years, it would skew the spending statistic, but would have nothing to do with tax cuts. 

As fascinating as discussions of economic theory are to everyone, the point of this commentary is to underline the fact again that academics with very little life experience outside of the ivory tower are drawing road maps for public policy.  Some, like Paul Krugman, get Nobel prizes for their theories, while others like Romer, get to actually implement their views.  Over the past 2 years, it’s clear that what looked good on paper, fails miserably in real life.  So, it’s abandon ship and back to the world of academia for her. 

But that begs the question.  If it didn’t work in real life,  is she going back to teaching it?  Will her views on economic theories change now that she’s seen them enacted in real time?  If not, the world had better be leery of Berkeley economics grads years down the road.

link The Blast.

This link is great.  An elegantly simple rebuttal to economic idiots who claim that destruction is actually stimulative to economies.  Just goes to show that even Nobel prize winners are wrong, no matter how much notoriety they get.

Anyone who has been involved in running an enterprise, no matter how small, will understand the broken windows analogy as it applies to their operation.  Excessive taxes, surcharges, levies, fees, permits and restrictions of all sorts thrust upon them by governments at all levels are broken windows that suck productivity from an enterprise.  The next time a distinguished academic tries to foist an Utopian business model upon the public, someone should check their business background.  Have they ever even run even a lemonade stand?  Even if the business was a failure, that would be far more useful experience than sucking at the nipple of a government job, or horrors, a career academic. 

Imagine if Sir Edmund Hilary decided to use the directions of Harvard cartographers   instead of Tenzing Norgay, the experienced Sherpa guide, in his quest to scale Mt. Everest.  He’d be famous today only to his family who’d remember him as crazy Uncle Edmund who tried to climb a mountain with a just a light jacket and some trail mix.

People who are pushing the redistributive agenda today are no different than a sherpa guide that counsels you to keep following the the trail down into the valley because eventually you will reach the summit.  Maybe the best idea is to pay them only upon arrival.