Sunday, September 11, 2011

The Greatest Economic Apologist for Big Government Spending--Since Keynes Himself

Reuters columnist David Callahan is hyping the economic models coming out of Moody's by Mark Zandi, which attempt to show some voodoo magic that occurs because of government spending:
Just last month, for example, the chief economist for Moody’s Analytics Mark Zandi released an analysis of stimulus measures work. Zandi advised John McCain in 2008 and is anything but a committed liberal. But his study, supported by the full weight of Moody’s modeling expertise, clearly shows that spending is the best form of stimulus.
Is Callahan serious? Zandi has been the biggest apologist for every move President Obama has made outside the bathroom. And just what the hell is this "full weight of Moody’s modeling expertise" about? Last I recall, Moody's failed to detect the housing boom and had no clue the subprime paper they were rating was toxic.

Moody's models are nothing but econometric mumbo jumbo. Here's more from Callahan about Moody's models:
The single most effective form of stimulus, the study found, are increased outlays for food stamps — which create $1.71 in economic activity for each dollar in federal spending. The other top two boosters are spending on unemployment benefits and infrastructure. Earlier studies, including by the Congressional Budget Office, have found largely the same thing.
First and foremost, it is savings-investment that causes an economy to grow, through the production of more goods and services. Markets clear. If there are consumer products out there, they will be purchased (See Rothbard on J.B. Say). Directing spending through government does not create some magical boost to the economy. It takes money from some and gives it to others. Food stamps and unemployment benefits stagnate an economy because they provide incentive for people to stay home and not work. Houdini was much more straight forward than Zandi. The Amazing Zandi is quickly becoming the greatest apologist for government spending since Keynes. Paul Krugman and Robert Reich eat your heart out.

1 comment:

  1. I believe it was Bob Murphy who wrote an article on Zandi a little ways back.

    He quotes a former colleague of Zandi's who worked directly with him and used the same type of models he uses to produce all these 'findings'.

    This guy said the models have a built in assumption that government spending increases economic growth.

    Got that? Zandi uses a model with a built in assumption that spending increase growth to 'prove' that spending increased growth.

    As Tom Dilorenzo would say..Mark Zandi is a museum quality example of a court economist.