White House says unemployment to remain at 9 percent through election
New projections from the White House’s Office of Management and Budget last week predict that the national unemployment rate will remain around 9 percent throughout the next 16 months and will not again approach 6 percent until 2016. Those numbers now approximate what the Congressional Budget Office has said. Yet, even those numbers are rosy compared to what Wall Street analysts have forecast.
This stormy vision of the future is being laid out in spite of massive deficit spending designed to “stimulate” the creation of new jobs. In fact, the White House is explicitly acknowledging such prognostications even as the president plans to take to the airwaves to make a speech advocating even more “stimulus” Thursday night.
The latest official acknowledgement by the White House reminds me of a quote from President Franklin Delano Roosevelt’s Treasury Secretary:
We have tried spending money. We are spending more than we have ever spent before and it does not work. … We have never made good on our promises. … I say after eight years of this Administration we have just as much unemployment as when we started … and an enormous debt to boot!
Politicians often find the Keynesian economists who advocate on behalf of so-called government “stimulus” politically convenient in that they provide a rationale for insane amounts of spending on political pet projects. Because of the high degree of aggregation in Keynesian analysis, little attention is given to the fact that individuals and families are forcibly deprived of the means with which to provide for their unique wants and needs. Instead, Keynesian analysis gives politicians carte blanche to confiscate real wealth in order to spend on government projects.
Policymaking of this sort carries more danger than the non-economist will immediately realize. Keynesianism facilitates the concentration of power. In fact, Keynes himself declared, in writing to the Germans in 1936, that his recommendations for increasing the size and power of government would facilitate the consolidation of Nazi power. As he wrote, his theory “can be much easier adapted to the conditions of a totalitarian state.”
Aside from the obvious political danger, the unjustified levels of aggregation in Keynesian analysis lead its advocates to overlook the composition of various economic indicators. When the government hires workers to dig ditches and fill them back in, for example (a favorite Keynesian example), nothing of value is produced even though aggregate “employment” numbers might see a temporary boost. A good economist should recognize that people don’t want to work simply for work’s sake – they work to produce something that improves their quality of life (e.g. microwaves, refrigerators, air conditioning, etc.)
In the simplest economy, individuals produce for their own consumption (e.g. subsistence farming). In complex, modern economies individuals produce items that others value and trade to fulfill their own individual needs. Keynesian “stimulus” theories ignore these basic truths about the purpose of work. Under this paradigm, government spending need not produce anything that private individuals would value enough to freely purchase because policymakers can force the transaction through higher taxes, borrowing and/or inflation. Hence, Keynesian analysis is a tool to force the will of the ruling class down upon private individuals – turning them into slaves who must work toward the fulfillment of politicians’ vision and not toward the improvement of their own lives.
Likewise, Keynesian analysis treats all of society’s capital resources as a single, homogenous substance. Keynesian equations assume that a Nike factory, for instance, is the same thing as a Ford dealership. This aggregation of capital conflates sound investments with poor investments and clouds Keynesians’ ability to see that it is precisely a distortion within society’s capital structure that causes systemic unemployment.
Austrian economists recognize that the current recession flows directly from such a distortion in the investment of capital resources – one that was compelled through government meddling in the housing sector and monetary sphere. Until policymakers become willing to accept this truth, they will remain blind to the corollary truth: the only means of recovery is to allow the market to correct for policy-induced mistakes through quick and orderly liquidation.
Instead, Keynesian-inspired politicians are forcing society to throw good money after bad in order to perpetuate a broken capital structure. This course of action will inevitably result in persistantly high unemployment and will lead down a dangerous road.