Obama’s Keynesian failures must never be repeated

 C’est l’article que  Bill Bonner se référait dans : Le plan de relance d'Obama a échoué

Extrait de: Obama’s Keynesian failures must never be repeated, By Darrell Issa , FT, February 7 2011

President Barack Obama’s $814bn economic expansion has woefully failed to reach each of its self-imposed targets. The president’s stimulus package promised (after adjusting for inflation) that gross domestic product in the fourth quarter of 2010 would be roughly $15,200bn.

Yet the latest figures, released this month, fell short by some $400bn. Instead of being an important milestone for the global recovery, the data are just one further example of the failure of Mr Obama’s Keynesian misadventure.

The fourth quarter target was set in a now-infamous January 2009 report, written by Christina Romer and Jared Bernstein, then economic advisers to Mr Obama and vice-president Joe Biden. Their analysis also concluded that US unemployment would never surpass 8 per cent, and by now would be in the neighbourhood of 7 per cent. Payroll employment was also projected to be 137.6m. In fact, unemployment has stayed stubbornly above 9 per cent for 20 consecutive months, while employment is currently 6.8m below the target – and that is without even counting those who have given up looking for work.

The latest GDP numbers are especially illuminating because the administration has now begun to make a new argument – that economic growth has returned, but job growth has mysteriously failed to follow.

The truth is that real GDP is just 3 percent larger than it was in the quarter just before the stimulus was passed, while the current employment situation is little short of dire.

It is possible that the fourth quarter GDP numbers will be revised upwards, but certainly not anywhere close to what the administration promised.

The figures get worse the more you dig into them. Some 47 out of 50 US states, for instance, have lost jobs since the stimulus was passed. A recent report from the House Committee on Ways and Means also detailed further failures, in part using a composite measure of debt held by the public and the unemployment rate – dubbed the “Obama Misery Index” – which has increased by a staggering 70 per cent since January 2009.

The stimulus did not even deliver on the kinds of jobs it promised to fund. Mr Obama pledged that 90 per cent of the jobs the package “created or saved” – a dubious calculus already rejected by the body charged with stimulus oversight – would come from the private sector. Studies have since concluded that the majority of jobs funded were in the public sector.

Apologists for the plan now claim it failed because the economy turned out to be in worse shape than they had anticipated. In July 2009 Mr Biden said of the lacklustre results that the administration had initially “misread the economy”, implying that the package was not large enough.

Yet the administration’s real mistake was a
misreading of economics, not the economy.

The abysmal results came as no surprise to those who knew that the Keynesian doctrine of spending your way to prosperity had been discredited decades ago. Research conducted by Harvard economist Robert Barro, for instance, found that the extra economic impact of government spending – also known as the Keynesian multiplier effect, which must be greater than one for any fiscal stimulus to be effective – was “insignificantly different from zero”. The Romer-Bernstein report, however, dubiously assumed a multiplier of 1.57.

In response to the stimulus package Prof Barro said: “It would be unfortunate if the best Team Obama can offer is an unvarnished version of Keynes,” adding that “the financial crisis and possible depression do not invalidate everything we have learnt about macroeconomics since 1936”.

Mr Obama and his advisers, however, appear to think that it did.

Now their only regret is that they did not spend more. Yet even without adding to their initial folly, we are still facing the largest deficit since the second world war.

Assuming government can allocate resources and spur growth more effectively than market forces is a mistake America must never allow to happen again. The stimulus packages has left taxpayers $814bn out of pocket, plus interest. Mr Obama’s Keynesian experiment amounted to little more than an exercise in the redistribution of wealth from our grandchildren, to today’s special interest groups. Those responsible owe them some answers.

The writer is a Republican member of the US House of Representatives, and chairman of the committee on oversight and government reform.

Darrell Issa

California Congressman Darrell Issa made his fortune as CEO of Directed Electronics, maker of the Viper and Python car alarms. He may have spoken to you sternly if you too closely approached a Viper-protected vehicle, as it is Issa's recorded voice that announces, "Protected by Viper. Stand back." Ironically, he was twice arrested for auto theft himself in the 1970s, but never charged.

Ran unsuccessfully for the US Senate in 1998, and elected to the US House in 2000. Estimates of his wealth vary from $160M to $250M, making him among the richest members of Congress. Issa spent about $2M of his own funds to finance the 2003 recall of California Governor Gray Davis, and announced his own intent to run for that job, but withdrew from the ballot the day after Arnold Schwarzenegger announced that he would run for Governor.