Bunker Bear Kicks Keynesian Ass : The Fiscal Multiplier DebunkedSubmitted by Cyril on Sun, 12/02/2012 - 05:24
By Tugwit the Terrible :
1) The fiscal “multiplier” is a scam to falsely justify government spending.
2) It’s a ratio, not a “multiplier”
3) It illegally puts addition first in the math order of operations.
4) The marginal propensity to consume determines allocation of income to spending, but is irrelevant to the effect of spending on income.
The Big Con
If the fiscal “multiplier” value exceeds principle plus interest, why do we have over $16 trillion national debt ? Why would we need to borrow in the first place ?
Does 10 x 10 + 1 = 101, or 110 ?
The Keynesian fiscal “multiplier” (government spending “multiplier”, GSM) is taught in universities, and used by the Congressional Budget Office ... and it's nonsense.
The GSM says that when government spends $1, national income increases more than $1. So government deficit spending should pay for itself, and politicians can't overspend, because we always get back more than they spend. Wrong. (See national debt.)
Presidential economic adviser Professor Christina Romer used a fiscal "multiplier" of 1.55 to calculate the number of jobs that would be created by the 2009 American Recovery and Reinvestment Act. When the jobs were less than she calculated, she said that meant that the recession was deeper than she thought. Wrong. Her calculations were wrong. There is no fiscal multiplier.
The tax cut “multiplier” is always one less than the GSM, so government spending is supposedly always better for the economy than tax cuts. Wrong. (See part 2.)
The Obama administration says that the GSM value is 1.5. So every $1 it spends returns $1.50. But the tax cut "multiplier" is always 1 less than the GSM, so if taxpayers are allowed to keep their $1, the return is 50 cents. Wrong. (See part 2, tax cut multiplier.)
The balanced budget “multiplier” says that even without deficit spending, government spending supposedly gives us a “free” increase in national income, which we wouldn’t otherwise get. And if we cut government spending, then we don't get the supposed "free" income. Wrong. (See part 2.)
The highest "multiplier" values are given to food stamps (1.73) and unemployment benefits (1.64). So supposedly the best thing to do for the economy, is to tax money from people who work and produce for it, and pay other people to do nothing and produce nothing. Wrong. Even Keynes said that is pure waste.
Every $1 paid to people to do nothing, is $1 less production. $1 wasted. Paying people to do "make-work" is even worse because it wastes materials like wood, concrete, and gasoline too. The more of that you do, the more waste, and the longer and deeper the recession.
And if the GSM is 1.5, and that value exceeds principle plus interest, why do we have $16 trillion national debt if ? Are we paying 51% interest ?
We have that debt, because the GSM is mathematical nonsense. It illegally puts addition first in the math order of operations.
It's stupid, idiotic, and Marxist ... Groucho Marxist.
The Keynesian fiscal “multiplier” is the biggest financial fraud in history. And it’s legal, because it‘s operated through government. And the "brains" behind the scam are government economists, and university professors (who are usually government employees).
The real question is whether Keynesians are frauds, or incompetent zombies who have fooled themselves too.
Reason doesn't work with Keynesians, because they have their math ... and their math is nonsense.
Read on :
"Some things are so stupid that only intellectuals believe them."
- George Orwell
"The fiscal multiplier is so fucking stupid that it's brilliant."
- Bunker Bear