Case in point: An editorial in the WSJ today (Old Europe Is Right on Stimulus) notes that Europe is rejecting US lobby for increased social spending. Selected excerpts:
Treasury Secretary Timothy Geithner heads to Europe today to lobby for a "global stimulus" from the G-20 countries that are holding an economic summit two weeks hence. This follows White House economic czar Larry Summers's weekend call for a "global stimulus," which leaders in Europe roundly rejected Monday. They were right to do so.
The Obama Administration came into office promising to listen to its friends and allies, so when Europe says non to gargantuan spending, maybe the President and his advisers should listen.
Luxembourg's Jean-Claude Juncker delivered the Continent's verdict on global stimulus. "Recent American appeals insisting that the European make an additional budgetary effort to combat the effects of the crisis were not to our liking," he said. That's putting it nicely.
For decades, countries like Greece, Italy and Belgium had run up huge national debts trying to pay for social-welfare programs and keep their economies afloat at the same time. The chief result of these policies was a huge pile of IOUs. In Italy, the
national debt stood at 107% of GDP in 1999. In Belgium and Greece it was 104%. Freece's fiscal house was so disordered that it was excluded from the first group of euro countries.
Question: Who are these countries borrowing from? Or is the question what are they borrowing?
While he's in the U.K., perhaps Mr. Geithner should also ask his European counterparts whether any of them have ever seen a 1.5 Keynesian "multiplier" in the wild. That's the idea -- promoted by Mr. Summers -- that every $1 of deficit spending yields $1.5 in economic growth. If that were true, Italy would be the richest country in Europe, instead of merely one of the most indebted.
On a related topic, the WSJ notes that the best Keynesian economic models show Obama's stimulus will fail. Head over to the WSJ and read the whole enchilada.
[W]e recommend a recent paper by a trans-Atlantic team of four economists -- two Germans and two Americans. The authors -- John Cogan and John Taylor of Stanford and Tobias Cwik and Volker Wieland of Goethe University -- subject the Administration's stimulus to the most recent Keynesian scholarship... What the four economists found is that the Administration's estimates for stimulus growth were six times as high as they could produce under a modern Keynesian simulation.As we have already noted, Obama's growth forecast is not based on Keynesian economics, but Reaganomics.
So President Obama (or as I call him, BO-44), the Great Depression told you Keynesian spending will not succeed, Argentina told you, California told you, and now Europe is telling you. Keynes is dead. Only removing barriers to capitalism, like China is doing, will help the economy.
Obama, can you hear me now?
My take? Obama's hearing is fine. Nor is he as big an idiot as he appears to be. He knows it won't work. He just doesn't care. He will impose socialism at any cost.