We Must Not Look at the Stars

Some facts and a question for my conservative friends and acquaintances.

Presentation by Sanjay Basu author of The Body Economic. C-SPAN. 

The IMF working paper called Growth Forecast Errors and Financial Multipliers reported that advice given by economists in various economic crises were all based upon a given number. That number was 0.5. It was the financial multiplier which was used to estimate the effect of stimulus actions such as food stamps during recessions.

This means that the question being answered is, for every dollar spent on stimulus what do you receive back in economic growth? Economic growth here is defined as job growth, growth in GDP, and business growth. Again, The IMF reported that the assumed multiplier was 0.5. In other words, for every dollar spent it was assumed that $.50 of benefit was made to the economy. A net loss of $.50.

The study found out that the reason this number was used was because no one actually knew the real number. It was a nice round number, and everyone assumed that, of course, there would be a loss.

However, when the IMF established four separate and independent groups to determine what the actual number was, the results were quite surprising. All four groups were working independently. They did not communicate with each other. And yet all four came up with the exact same number.

The number was 1.7. Yes, that's correct. For every dollar spent on stimulus actions such as food stamps or job security programs, or other such safety net stimulus programs, during a recession, the economy gained in job creation and other economic growth by a factor of 1.7 which is to say for every dollar spent $1.70 was gained. A net gain of $.70.

Don't forget that those groups expected to find a loss at or about .50. Yet, they found out that there was a gain, and quite a large one at that.

Also remember four different groups came to this exact same number. No one got 1.8, no one got 1.6, all got 1.7.

Note: physical multipliers do not always gain so much. This is what they gained during recessions. Sometimes they gain less, in non recession circumstances, sometimes they even go negative.

Mr. Basu's point is not supportive nor nonsupportive of welfare payments in general. He simply believes we need to look at the data, instead of our own mindless ideologies, in making such decisions. The left-wing ideologues who say that these programs always stimulate the economy are not dealing with reality. The right wing ideologues who say that these programs never stimulate the economy are not dealing with reality.

And how about those independent Texans? During the savings-and-loan crisis of the 80s, Texas was bailed out by Massachusetts and California. Yes, they took welfare from other states. Yeee haw, Texas! We are independent until we need money, then we're on welfare! But, shhhhhhh, don't tell anyone!

He also pointed out that the belief that high socialistic pensions and greedy workers caused collapses was a cultural belief which was very hard to effectively dispute, even though the facts showed that it was not true. For example, the German economy is doing very well while the French economy is not. Many people in America, especially commentators on conservative radio and television programs and Internet blogs, have blamed high French pensions. The problem is, the French pensions are less of an economic drag than the German pensions. That's right the German workers get a better deal than the French workers. So, if those conservative beliefs were true, Germany would be in worse shape than France. And we all know, it isn't.

Furthermore, when a very careful research study was done all across Europe to determine just how hard people work, the results showed that the supposedly lazy Greek workers who never do anything, according to those conservative commentators, actually worked longer and harder than their German counterparts. Once again, those ugly facts just are so nasty to your beautiful conservative theories.

Another interesting issue. What if all Americans had access to excellent health care? Obviously, this is not true now. Millions of Americans have no healthcare all, and the Republican created Obamacare system isn't going to help enough, although it is better than nothing. 

So, back to the question, what if all Americans had access to high-quality healthcare? According to studies made in the 90s, we could eliminate 15 to 20% of all preventable deaths in this country. That's 15 to 20% of the number of Americans who are currently dying of preventable deaths, not dying every year. How much do you suppose that's worth?

Now, I believe in the teachings of Christ, we need to take care of everyone, especially the poor and desperate. I also believe that these actions have benefits which go far beyond stimulating the economy, as I have expressed elsewhere. But those are opinions. The facts are the facts, and I'm prepared to deal with them.

Why aren't you?

That's a rhetorical question. I know the answer. Thinking is hard, hard work that takes a lot of time. No, I'm not saying you're lazy. I'm saying you are very busy people and you just don't want to spend all that time and effort thinking about economics and politics. You've got other things to do!

But if you're not going to take the time to check the facts yourself, you must find a reliable source to give them to you. And if the sources that give you your facts always give you information that is not true, that's your fault. You picked them. They didn't pick you. They just set their wares out and you came running. If you stuff your gut with nothing but candy and junk food, don't blame me if you get diabetes. And of course I'm referring to mental and moral diabetes.

Don't you understand that not being careful and letting your emotions and fears run away with you makes you easy prey for conmen and manipulators who want to keep you angry about silly lies? They want to do that so that you won't look at the facts. The facts that would make you stop them from parasitizing our economy. They prefer the angry lies that keep them fat, lazy, and wealthy while you struggle hard for every dollar you make. 

Although I sometimes refer to you as paranoid, I don't mean that as a diagnosis. My diagnosis wouldn't be paranoia. It would be gullible, conned, duped, fooled. Either get informed, learn the facts, and then make decisions, or stop spouting nonsense. Please. Everyone has the right to speak out, even if they make fools of themselves, but people who take the time to find out the facts become informed about reality. Then it becomes clear that they are not high on soundbites.

It's so much easier just to spout those lovely little sound bites that get you all worked up emotionally. Who takes time to think when you're angry? You NEED to think when you're angry. The angrier you get, the more important it is to take some time to calm down and look at the facts. I really wish you would do that. The facts are out there, you just won't look at them.

Extremists, both left-wing and right-wing, remind me of Plato. He very famously said, if we are to discuss the cosmos we must not look at the stars. In other words, Facts? We don't need no stinking facts! They'll just confuse our pretty theories.