Sunday, January 11, 2009

Government Meddling in the Economy: The Jeffrey Sachs Edition

Jeffrey Sachs, Director of the Earth Institute at Columbia University and Special Advisor to United Nations Secretary-General Ban Ki-Moon, has penned a column for TIME Magazine titled, The Case for Bigger Government.

Let's take a look at this "case for bigger government".

Sachs writes:

Thirty years ago, Americans were told that government was part of the problem, not the solution. We bet on the magic of the marketplace, but the magic proved illusory. Every major part of the economy — health care, energy, transportation, food and finance — is deeply troubled
Government is part of the problem and Sachs is simply wrong in contending that the "magic of the marketplace failed". Over the last 30 years the money supply has been inflated by 493%. In December 1978 M2 nsa money supply stood at 1370.8 at the end of December, 2008 M2 nsa money supply stood at 7944.3. The distortions caused by this massive money printing are what the current downturn is all about. The Summer '08 slowdown in money growth caused the economy to begin to adjust to a non-inflationary environment. Sachs simply ignores this fact, and cruises on as though the Federal Reserve did not exist and, thus, had no impact on the economy.

The above sentences above that I quote from Sachs are the beginning and end of his "case" for bigger government. From there he simply provides prescriptions on how to grow government. He writes:

Now we are ready to invite government back in to help solve our problems, if the price is right and the strategies are convincing. By spending more through government and treating government as a partner rather than an enemy of the private sector, we can potentially save vast sums in the long run through a more efficient health-care system, safer climate, more competitive economy and more secure country.
It is clear that Sachs has no understanding of the business cycle. And little, if any understanding of how markets work. He further writes:

Expanded spending by government — for health care, climate change,energy security, education, infrastructure and peaceful diplomacy — is urgently needed, but large deficit financing is not a long-term option. Although Obama's tax cuts might stimulate consumer spending — and placate Republicans — any permanent cut would be a huge error, and even short-term tax cuts are an unnecessary risk. Obama's long-term success will depend on his ability to lead Americans to a new, even revolutionary consensus that the U.S. government can offer value for money.
This is simply socialism. The government, according to Jeffrey Sachs, knows how to spend your money better than you do. Damn choice, it's what the government wants that will be provided.

I hereby apply to be czar of economic book publishing. Jeffrey send me any new writings you have, I'll take a look at them and see if the public really has any interest in them. Just pull a number, stand in line, and don't call me I'll call you.


  1. OK, where are the great free market entrepreneurs? Instead of building great enterprises, they're building walls of cash? Instead of hiring, they're firing. Buffet says to invest when there's blood on the streets. The blood is on the streets. Where is the private sector? Only gov't, it seems, has the will to act. The financiers got the bailout they wanted, but they merely sequestered it. Isn't there a single business in America with the guts to step forward?

  2. "The financiers got the bailout they wanted"

    You can't call financiers, who wanted a bailout, free market people. They actually fall into Sachs'category.

    As for entrepreneurs firing people. The business cycle is all about restructuring. If anything, the fingered should be pointed at the Federal Reserve for distorting the economic structure which results in people ending up working in a distorted market that is highly subject to layoffs.

    All the hoarding of cash does s readjust the price level lower, the governments attempt to fight this brings about further distortions and ultimately inflation.

    The government "fix" is like helping a person who is hobbling, with cast on his leg because of a broken bone, by breaking the cast.