Bernanke’s Delusion About Spending And Respectable Economists


Congressman Sean Duffy did an amazing job pinpointing the issue with Ben Bernanke. I suspect that the reference to $700 billion to teach shrimp to use a treadmill was a misprint, but that is a minor problem. Duffy tried to get Benanke to admit that two percent of the budget could be cut without causing catastrophe, and that the government needs to do at least that much to avoid the coming collapse of the American economy.

Among other things, I gleaned from Ben Bernanke’s words that he believes three things.

  1. Smart spending by government is superior to stupid spending by government.
  2. Stupid spending by government is superior to no spending by government, especially when economic growth is slow.
  3. Stupid spending by government is superior to leaving money in the private sector (through lower taxes) to be spent according to the decisions of the people who earned the money.

If you think there is any other interpretation possible, I’d love to hear it.

“Most Economists”

Bernanke testifies that, “I think most economists… are saying that this will cost a lot of jobs in the short run.”

But those economists are fostered and nurtured by what politicians want to hear. The government has an innate demand for “intellectuals” who will tell them that the only thing that can save society is for the state to “do more.” How many ways can an economist make a living outside “the public sector”? Bernanke himself is an example. George W. Bush chose him as Greenspan’s successor at the Federal Reserve precisely because Bernanke chose to believe and authoritatively declare that there was no housing bubble.

If you choose to believe “most economists” then you deserve what you get.

“Cost a lot of jobs”

Let’s say for the sake of argument that such a measly cut in the planned growth of government spending would cost some jobs. Consider employment 2005 and 2006 (or thereabouts). Did the economy really need that many people making houses, manufacturing dry wall, or selling real estate? Were those jobs actually the right ones that could provide prosperity?

No. They were delusional mistakes. They resulted in a large group of people who suddenly couldn’t afford the payment on a home that was worth less than what they owed on those houses.

If we are now still in a state in which the economy is run by delusional misinformation, what has to happen so that people go into the jobs that are truly needed in the economy? The answer is obvious: their old jobs have to go away so that the new jobs can be created by real demand.

Bernanke believes that all that matters is spending. But money is worthless unless it is a tool to help people in society learn how to meet real needs. Bernanke’s debt-driven government spending obstructs that whole process. It directs people into more unnecessary jobs that can only, once again, culminate in another collapse. Economic prosperity does not come from simply increasing the amount of green paper in circulation. It comes from people increasing their efficiency in how they meet real needs.

What would have been best for the economy is for government to cut spending drastically in 2007 (as we did in the “forgotten depression” of 1920-1921) and let the banks and AIG go bankrupt. We would already be well into recovery right now.

Instead, we’re just waiting for another crash.