Bad Ideas
Wesbury, Brian S.
BAD IDEAS CONFIDENCE GAMES & DEMAND-SIDE DANGERS BY BRIAN S. WESBURY The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powe~ul...
...Everyone understands that since Sept...
...Indeed the world is ruled by little else...
...Plotting the Conference Board Current Conditions con20 THE AMERICAN SPECTATOR 9 NOVEMBER/DECEMBER 2 O O i fidence index against real retail sales growth during the six months that follow produces a scattershot pattern: consumer confidence predicts just three-tenths of a percent of the subsequent change in retail sales...
...We have all heard this argument before, usually arguing for redistribution of wealth, but rarely as a justification for mass murder...
...Even the President has gotten into this debate by saying, "we need to provide more tax relief to individuals to boost consumer confidence...
...David H. Ha&worth (ret) joined the US Army in 1945 as an under-age 15year-old...
...They're watching the current conflict on TV while less than ten percent of our muscle-bound force is actually involved in hunting down and taking out the bad guys...
...Even Osama bin Laden has an insatiable demand for terrorist capabilities...
...And then his boss, General Tommy Franks, U.S...
...But these demands cannot be satisfied until production takes place...
...It argues that consumer demand is the catalyst for economic growth, the gas in our economy's tank...
...has no incentive to inhibit the creation of wealth by other countries.A wealthy nation is a potential trading partner and market for American goods and services.Wealth feeds on the success of others...
...Statistical models show that consumer confidence has virtually no predictive value as an economic forecasting tool...
...Looked at the other way, 99.7 percent of the growth in retail sales is determined by factors other than consumer confidence...
...President Bush has been masterful when it comes to dealing with the military, but he has missed the opportunity presented by a war-time bully pulpit to promote good economics...
...success at creating wealth...
...economy in the years ahead...
...It's a perfect economic theory to support more government involvement in all aspects of the economy and greater redistribution of wealth...
...The answer is simple...
...i t i itlt tint art tt lit Brian S. Wesbury is chief economist at Griffin Kubik Stevens & Thompson, a Chicago-based investment bank specializing infixed-income securities...
...Most of our conventional military fights are like a flabby fatso duking it out with a lighter, quicker opponent...
...In other words, confidencemor more to the point, lack thereofNrelated to terrorism is not an economic problem...
...and much of the rest of the world has nothing to do with the wealth of the U.S., but has everything to do with the continuing lack of freedom in so many places, even with the Soviet Union and its empire, long ago on the dust heap...
...John Maynard Keynes L ord Keynes wasn't right about much, but his remark above was certainly on the mark.Two mistaken economic ideas are having a direct impact on the U.S...
...The first was nicely expressed by Michael Lerner, editor of the progressive Jewish magazine Tikkun, during an interview on the PBS NewsHour in early October...
...Lerner, once a key advisor to Hillary Clinton, believes that poverty around the world is caused by U.S...
...Rather, the slowdown in consumer spending of recent months is rooted inmsurprise!mthe current recession...
...A rational country would only want the best for every other country in the world...
...The second wrong-headed idea making the rounds is that declining consumer confidence is the cause of our current economic difficulties...
...Keynes believed that the problems of the Great Depression revolved around the lack of demand...
...Production is the process of creation...
...technology, a military lawyer in Tampa, Florida shouted, "Cease fire...
...At the same time, our forces are spread around the globe like Roman Legions, in unified commands such as General Frank's Florida-based CENTCOM...
...When freedom does not exist and taxes, government spending and corruption are high, entrepreneurs and the process of wealth creation inevitably suffer...
...He went so far as to suggest that the government pay people to dig holes in the ground and then fill them back up...
...He fought in Korea and Vietnam, and is the author of the international bestsellers About Face, Hazardous Duty and other books...
...While not nearly as catastrophic an error, the idea that consumer confidence is the cause of our current malaise has its roots in similarly misguided analysis...
...Not all the dangers in the world are obvious...
...The disparity of wealth between the U.S...
...consumer confidence has fallen along with the rest of the economy...
...Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist...
...If consumers spend less for travel, they will spend more on other thingsmflags, for instance, or gas masks, or who knows what else.As a result, overall spending levels should not deteriorate dramatically over the long-term just because of the attacks...
...11 attacks...
...But governments tend to like this argument~it makes them the center of economic activity...
...It is a near-mystical event that can only occur in an environment of freedom...
...Can i Col...
...LET'S GET IT RIGHT BOOT THE PENTAGON'S PERFUMED PRINCES BY DAVID H. HACKWORTH O n D-Day during America's first strike in Afghanistan, the cross hairs of an unmanned Predator's air-to-ground missile were locked dead center on Mullah Omar's forehead...
...Homages to ~II aside, the U.S.Armed Forcesmwith a total force, active and reserve, of about three million people---has more colonels than machine gunners, more 22 THE AMERICAN SPECTATOR 9 NOVEMBER/DECEMBER 2OO...
...The fallacy underlying this theory is that the accumulated wealth of the world is a "zero-sum" game...
...But just as the Taliban's capo di tutti capi was about to receive his one-way ticket to Paradise courtesy of U.S...
...See the map at right, and think about some of the implications...
...Major business publications and leading economists routinely refer to confidence as a "critical" economic indicator...
...No new supply would have ever occurred...
...it falls when the economy is weak and jobs are being destroyed...
...The Wesbury corollary: "Demand creates nothing...
...Instead, they set up interminable risk-assessment safety nets-including rules of engagement tighter than a gunsmith's vice--to avoid taking any bullets to their careers...
...It combines ideas, faith and a willingness to take risks to develop goods and services that others need, want or desire...
...Read his nationally syndicated column at ummzhackworth.com...
...But as the great early 19thcentury French economist JeanBaptiste Say told us many years ago, "Supply creates its own demand...
...Confidence rises when the economy is growing and jobs are being created...
...He said that the U.S...
...The defunct economist, John Maynard Keynes, still has a strong grip on our nation's economic thinking...
...Our wealth is directly related to other people's poverty, and when that's the case in the world, then you're going to find a great deal of anger and resentment...
...The creation of wealth is not zero-sum...
...Knowing this, why do economists and our nation's leaders still talk about confidence as if it were the Holy Grail of economics...
...Consumer confidence is a proxy for demand...
...Contrary to war-fighters of the past, they don't have the bold stuff to roll the dice and go for broke...
...Unfortunately, today's politically correct senior uniformed leaders were selected for their Kinder-GentlerGlobal-Village bent.The result is that we're stuck with careerist, MBA types--I call them Perfumed Princesmwho act more like corporate CEOs than warrior-leaders...
...Talk about the twilight zone...
...Furthermore, the U.S...
...That is why countries that are free create more wealth than those that are not...
...Right after the 9/11 attack, our Germany-based two-division Armored Corps moved to Poland to practice "Hi-Diddle-Diddle-Right-UpThe-Middle"--a tank tactic of Patton's 57 years ago...
...But blinkered and bureaucratized military leaders who can't think out of the box must be making R.umsfeld lose it more and more frequently since he returned to the Pentagon for another tour, this time with the mission to boot that five-sided institution into the 21 st Century...
...Meanwhile our warriors, our military assets and the citizens of this great land have never been so exposed...
...Government redistribution is...
...11, fear of flying has hurt the airline and travel industries...
...While such spending would indeed create economic activity--as would scattering dollar bills--it could not have created new wealth...
...Think of it this way...
...Every year, the Heritage Foundation and the Wall Street Journal publish an Index of Economic Freedom, ranking the world's countries according to ten broad categories of economic freedom...
...But no matter what kind of tax rebate package Congress comes up with, of and by itself, it will not appreciably reduce that fear...
...it's a security problem.And until Americans feel safe again, they will make different choices...
...Central Command chief, chose to let this crazy call ride...
...you imagine what George Patton would've done if his legal beagle had dared to suggest,"Don't squeeze the trigger, even though you've got Adolph Hitler's head sitting on a rifleman's front sights...
...BAD IDEAS CONFIDENCE GAMES & DEMAND-SIDE DANGERS BY BRIAN S. WESBURY The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powe~ul than is commonly understood...
...what's harder to understand is why some in the Bush administration are now carrying the same torch...
...and the world following the Sept...
...No matter where you go in the world, consumers have an infinite demand for goods and services...
...has five percent of the world's population and twentyfive percent of the world's wealth...
...And only in a free environment can most individuals find their true God-given talents and put them to use...
...Left standing, they could have a powerful negative impact on the U.S...
...It's certainly hard to expect-or even detect~a great deal of supplyside stimulus from the tax bill that has been working its way through Congress this fall...
...Most people wouldn't realize that these two equally misguided ideas have their roots in the same demand-side philosophy that Keynes fathered...
...It's easy to understand why liberals love this...
...Insiders say that when Defense Secretary Donald R.umsfeld got the word, he almost pounded his desk into toothpicks...
...He argued that if consumers were unwilling to spend, then government should do it for them...
Vol. 34 • November 2001 • No. 8
