Monday, August 16, 2010

Disingenuous Economic Reporting In The WSJ

Before I took a brief sabbatical from writing this blog earlier this month, I had saved a Wall Street Journal front page article on which to comment. The column, from July 27, was entitled Next Step on Economy Hinges on Debate Over Stimulus.

I found the piece entirely disingenuous in that it gave significantly more weight to the pro-stimulus argument, despite absolutely no credible economic research or other evidence that such actions have ever worked in a large, modern economy.

Consider this quote from the article,

"But today, neither side can say with certainty whether the latest stimulus worked, because nobody knows what would have happened in its absence."

Never mind that we know from Amity Schlaes,' and others research, that the gigantic 1930s FDR-led stimulus programs failed. Or that the current programs have failed to meet the few objectives voiced for them.

Some people will continue to apologize for and excuse any and all manner of stimulus spending.

A more recent Journal piece by Alan Meltzer, as well as a statement attributed in the July column by Carmen Reinhart, both focus on modern consumers behaving differently, by expecting higher future taxes, when government deficit spending rises. This was never even imagined by Keynes and his minions.

Another misleading aspect of the article is that it fails to note that, when the US embarked on its failed stimulus programs of the 1930s, the national debt was far smaller, on several measures, than it currently is. And the nation hadn't run an almost constant annual budget deficit, along with legislating ever-greater future social spending promises, for nearly 80 years!

Thus, now, global investors are much better informed about the continual propensity of the US to spend money it doesn't have. Sooner or later, even high T-bill rates won't adjust for the risks of the US simply failing to generate sufficient tax revenues to pay debt interest.

The WSJ is a serious national daily business newspaper. If it can't manage to publish realistic, credible lead stories on its front page, who are we to trust to tell consumers and investors the truth about the recent macroeconomic mistakes of the US federal government?

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