Friday, July 9, 2010

Law School Dean Pretends to Be Economist and Goes Wild

Here is the best proof yet that some college educators don't have a clue about basic economics and the ramifications of their proposals. Jeffrey Miron writes:
Christopher Edley, currently dean of UC Berkeley’s law school and formerly an important advisor to Bill Clinton, is concerned that states cannot run their own macroeconomic policies. So he proposes the following:
The best booster shot for this recovery and the next would be to allow states to borrow from the Treasury during recessions. We did this for Wall Street and Detroit, fending off disaster. It’s even more important for states.
The potential for this plan to unleash catastrophic increases in state debt, analogously to what happened with Greece once it joined the Euro zone, should be obvious.
Miron is understating the magnitude of this insane idea by the power of , at least,10,000.

It would certainly eliminate the need for responsible fiscal policies by the states, but the further question has to be, "Where would the federal government get the money for such a program?" They would obviously have to increase the debt, which suggests eventual money printing by the Fed.

This is not analogous to Greece, since most of the EU is only offering minimal support of Greece--and dragging their feet at that. It is more analogous to the EU saying, "Hey, Greece spend whatever you want. We'll loan you the money."

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