Tuesday, August 2, 2016

Once Again, John Hinderaker is 100% Wrong About Economics

This is just a brief note.

Last week, John Hinderaker of Powerline, who fancies himself an economic analyst, wrote the following:

Perhaps Mr. Zandi still believes in the magical “multiplier effect” that was in vogue in the 1960s, and somehow transformed government spending into a growth vehicle exceeding all others. Most economists wised up long ago.

As I pointed out in my rebuttal, the multiplier effect is actually alive and well.  Today, we discover that governments around the world are accepting this reality again.  From Bloomberg:

Loosening fiscal policy a little in the most advanced economies could pay for itself, according to Oxford Economics, a U.K.-based research house. Their simulations suggest that a boost worth 1 percent of gross domestic product in government investment over two years would raise the level of GDP in individual Group of Seven countries by between 0.6 percent and 1.4 percent by 2017.

The article also includes the following paragraph about the U.K.:

If there’s one country where the political tide has definitively turned against austerity, it’s the U.K., following the vote there on June 23 to leave the European Union. Policy makers on both sides of the fiscal-monetary divide are likely to throw whatever stimulus measures they can find at the economy to prevent a painful contraction. Chancellor of the Exchequer Philip Hammond -- who replaced Osborne when he was fired by new Prime Minister Theresa May -- said this month he’s ready to “reset” fiscal policy to respond to Brexit if need be.

Thankfully, Mr. Hinderaker's economic stupidity isn't spreading.

Here's the kicker: Mr. Hinderaker is now the head of a "think tank" that publishes economic reports. Can you imagine how terrible their research must be?