Economics: Presidential candidates slip on Econ 101 – Nov. 9, 2011

Economics: Presidential candidates slip on Econ 101 – Nov. 9, 2011.

This is one of the things that has driven me (and lots and lots of other people) insane over the past few years.  In almost literally econ 101 (my intro macro and micro classes in my MBA program), supply and demand and Keynesian principles – and rules – were clear and easy to understand.  I’m not saying that everyone out there should be a Keynsian economist, but the ideas behind it are clear.

Yet we can start with the very beginning of the economic crisis, with the bail-outs of Merril and Bear and the government and Fed “buying” into all of these entities that it has never touched before.  It’s one thing for the government to put money into circulation for stimulus.  It’s another to start owning companies.

But two things that are key to basic economics were ignored amid all the yelling.  First, that the government is the only entity big enough to make such massive economic moves – short of JP Morgan (the person) back in the day, no one person could pump that much money into the economy as the ARRA did.  And yes, the budget that first year was MASSIVE.  But from day 1 Geithner and Obama said that this was temporary, that the government must pull back at some point.  Bernanke said that he had a plan already in place for “unraveling” the Fed’s involvement in these companies.  So the government had to do this stimulus spending (Keynsian) but it also had to stop at some point and address deficit concerns, etc.

Second, that claims made about how dangerous these spending policies were and about the “fixes” failed to address supply and demand (the $2/gallon promise) or the fascination/obsession over a balanced budget.  Remember the last time we tried a balanced budget during a recession?  Yeah, that led to the Great Depression.

Unfortunately, the majority of Americans just aren’t that bright.  Sorry, that’s not fair.

The majority of Americans do not want to listen.  They want to hear that gas prices will go down.  They want to hear that a deficit (isn’t that inherently bad??) will go away.  They want to hear that it is possible to balance a budget (and nothing will go wrong, right??).

I want to hear those things, too.  But 99% of my brain knows that such things are pipe dreams.

And there is a deep-rooted fear that this appeal to the masses, if you will, will unseat many truly smart people, doing good things, just to put others into the White House and Congress who will either do the same things anyway (because, after all, when the $2/gallon promise falls through, it’s still just supple and demand) or, even worse, hold our government hostage while sound policies are derided in the name of some ridiculous ideal.

Leave a Comment

Your email address will not be published. Required fields are marked *