Tuesday, June 23, 2009
half-assing your way to recovery
The Washington Post has an article (registration required) on the dropping poll numbers on Obama's stimulus plan. This is a shock? The plan is doomed. People are instinctively realizing this fact. I say instinctively, because most people don't study economics. So they don't realize that economic theory states that the plan is doomed.
The well-known theory about macroeconomics is Keynesian. And Keynesian theory states that in the midst of an economic slump, borrowing and spending by the government will revive underused assets, put money in people's hands, and jump-start the economy. Now I don't buy this theory. But even if I did buy it, Obama's plan wouldn't jump-start the economy.
The money has to be spent in order to stimulate the economy. Obama's plan spends most of the money in 2010 and later. Nobody is going to spend, money today because they hope to get a government job in 2011. If Obama was serious most of the stimulus would have been on the military. Expanding government military contracts would have been the quickest way to push money into the economy in 2009. The military knows how to spend money fast. It is not a big surprise that he didn't do that.
Obama is creating a huge deficit to support his environmental and health care goals. You may or may not agree with those goals, but they are not primarily being pursued to stimulate the economy. And people know it.
The well-known theory about macroeconomics is Keynesian. And Keynesian theory states that in the midst of an economic slump, borrowing and spending by the government will revive underused assets, put money in people's hands, and jump-start the economy. Now I don't buy this theory. But even if I did buy it, Obama's plan wouldn't jump-start the economy.
The money has to be spent in order to stimulate the economy. Obama's plan spends most of the money in 2010 and later. Nobody is going to spend, money today because they hope to get a government job in 2011. If Obama was serious most of the stimulus would have been on the military. Expanding government military contracts would have been the quickest way to push money into the economy in 2009. The military knows how to spend money fast. It is not a big surprise that he didn't do that.
Obama is creating a huge deficit to support his environmental and health care goals. You may or may not agree with those goals, but they are not primarily being pursued to stimulate the economy. And people know it.
Monday, June 22, 2009
Game Changer
We have this mythical idea of the mass uprising. Gandhi "saved" India through peaceful protest. It was peaceful because the British decided not to keep killing Indians. They lost the stomach for colonial rule. Tienanmen Square was a nightmare because the PRC would use force. And guess what: 20 years later the communists still run the country.
Now we should be realistic and accept that the mullahs will be violent and eventually crush the protesters. However, however, if the reports are true and the Commander of the Iranian Revolution Guard Corps has been arrested for refusing to use force against the protesters the game has changed. The end may be near for the theocratic medievalists in Tehran. They mullahs can't use force if they don't control the force. We can only hope.
Now we should be realistic and accept that the mullahs will be violent and eventually crush the protesters. However, however, if the reports are true and the Commander of the Iranian Revolution Guard Corps has been arrested for refusing to use force against the protesters the game has changed. The end may be near for the theocratic medievalists in Tehran. They mullahs can't use force if they don't control the force. We can only hope.
