Mythologizing the Myths

Kevin Drum has a post up addressing various “Right Wing Myths” about the economy. Some of these myths are self-refuting: he claims the stimulus worked because economic models indicate that it should have worked, he repeats the claim that 1937 proved Keynesian theory (ignoring that 1946 refuted it), he pretends that the Reagan tax cuts didn’t stimulate the economy, he ignores an anti-correlation between unemployment and profits, he claims that since a narrow plurality cite “poor sales” rather than “taxes” or “regulations” as their primary problem (23% vs. 20% vs. 16%, a statistically meaningless difference), this means poor sales are the only problem. He claims Republicans support bailouts as though Dems don’t and as though bailouts didn’t infuriate the Tea Party. He also claims deficits aren’t a problem right now because low interest rates will apparently last forever.

But there’s one particular point that galls me and it keeps coming up again and again. Here it is in graphical form:

I’ve addressed this before but it’s worth addressing again. Anything beyond 2011 in that plot is pure fantasy. It is no more real than the surpluses we once projected for the Naughties. One example: that plot show stimulus spending shrinking to near zero. The Democrats are right now pushing to use FY 2011 as their baseline.

Moreover, we really have to stop calling the tax cuts the “Bush tax cuts”. Obama has already extended them once. And if they are extended beyond 2012, it will be with Democratic cooperation. In fact, the Democrats are only agitating to raise taxes on “the rich”, who account for maybe a quarter to a fifth of the total.

Obama owns this budget. He had unfettered control for two years, still holds the Senate and wields the veto pen. He extended tax cuts, continued TARP, stimulus spent and did nothing about entitlements. Yes, he was handed a shit sandwich by the blazingly incompetent Bush Administration. But he had responded by stuffing more manure into it.

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  1. Seattle Outcast

    In order to “prove” a theory you’d actually have to present evidence that it accurately predicted events based on specific inputs. Or, more rationally, you fail to disprove a theory by not being able to show that it fails under conditions that it encompasses. Keynes has NEVER managed to pass the smell test of accurately predicting future economic outcomes (economic upturns and prosperity) based on specifically designed inputs (massive government spending).

    The rational that the inputs just weren’t “big enough” is obvious bunk – it doesn’t work that way – either “stimulus spending” works or it doesn’t. If it has to be such a massive percentage of the GDP that it bankrupts and destroys the economy in order to produce a result that is measurable, then the only conclusion you can make is that if it does work, it works much the same way that shooting a horse with a broken leg works.

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