We Cannot Build An Economy On Lies

Second, the notion that governments cut spending is simply a progressive fantasy. The graph below shows that contrary to what Hughes claims, federal spending per capita has risen sharply, especially with Republican presidents.

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However, in 2008 all those so-called free market reforms fell apart and it was Government to the Rescue. That the current real estate and stock market bubbles are the direct creation of a nationalized mortgage system and aggressive Federal Reserve System efforts to suppress interest rates does not even begin to resonate with people like Hughes. They simply stick to the narratives spelled out twice weekly by Paul Krugman—government spending is good, private saving and investment are bad—and repeat them enough that they supposedly become established facts.

So, what kind of economic future do Hughes and Time envision for the rest of us? Hughes presents a scenario:

[A] managed economy on a national scale needs public investment to flourish. When government invests in public goods like roads, airports, public transit, schools, solar panels, economic growth soars—just like when you put a roof over a farmer’s market. President Biden has begun his term as President by proposing a $2 trillion infrastructure investment and calling it a prerequisite for creating growth in the future. Finally, the new managed market recognizes the need for the state to buffer shocks and surprises.

The fantasy continues:

At a national level, monetary and fiscal authorities employ macroeconomic policy to mitigate the blows of unexpected crises. Just last year in response to the pandemic, the Federal Reserve took rates to zero, restarted its bond buying program, and broke new ground by moving into corporate and municipal debt markets. Meanwhile, political leaders of both parties passed three emergency aid bills to keep tens of millions of Americans out of poverty and thousands of businesses above water.

Without this support, economists believe we would be living through the darkest time in modern economics. “Without them, without those fiscal and monetary measures, the global contraction last year would have been three times worse,” said the managing director of the IMF. “This could have been another Great Depression.”

We have always used regulation, public investment, and macroeconomic management to make our economy work, but we’ve done so sporadically and often weakly because we’ve told ourselves a different story about how the economy works. It’s time for the story we tell to match the reality of economic growth—and to fully embrace the opportunity that creates.

As I read this sort of economic revisionism, I am reminded of Rod Dreher’s book, Live Not by Lies, which is based on a text written by Aleksandr Solzhenitsyn. Dreher is writing specifically to American Christians who are facing increasing hostility from progressives and the institutions that they control. His point is that much of what our political, economic, media, and educational elites are telling us are outright lies and that elites are demanding that everyone conform to them. Those that don’t are mobbed, fired from their jobs, and publicly humiliated.

Likewise, we see elite academic economists and elite journalists telling outright falsehoods about our own economic history, making false claims and even trying to portray the Great Depression itself as something that was caused by failing markets and was mitigated and ultimately ended by FDR’s New Deal policies. (Krugman and other economists make the false claim that the New Deal actually created the American middle class.)

The current set of lies tell us that the way to “grow” the economy over the long term is for government to borrow trillions of dollars, spend it on programs (such as paying people not to work at a time when jobs are begging) while simultaneously blocking capital development in areas that are profitable, especially in the energy industries in which the Biden administration plans to seek capital “divestment” from profitable oil and gas ventures and divert capital into the inefficient and costly “alternative energy” sectors.

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