AFTER PRIDE COMES THE FALL

12/2/10

According to this morning’s (i.e., Thursday, 12/2’s, page A2) Wall Street Journal, Fed officials, including Obsequious Ben Bernanke, are pushing, as Mr. Bernanke puts it, a plan “that combines near-term measures to enhance growth with strong confidence-inducing steps” to reduce the deficit. Another Fed eminence, Vice-Chairman Janet Yellen, said Wednesday that

“We need, and I believe there is scope for, an approach to fiscal policy that puts in place a well-timed and credible plan to bring deficits down to sustainable levels over the medium and long terms while addressing the economy’s short term needs.”

There they go again with those “needs” that seem to become dire and urgent whenever your money becomes available, but I digress.

Such platitudes and puffery as that emanating from Ms. Yellen and Mr. Bernanke are the fiscal equivalent of a drunk who promises to go on the wagon but only after engaging in one last week long bender. There is plenty of enthusiasm for the short term binging, and, perhaps, for the clean and sober living that is to follow…as long as the onset of that rectitude remains in the future.

Rarely, if ever, in history has it been nearly as easy to put on the fiscal brakes as it has been to push the fiscal accelerator. Assuming, perhaps bravely, that the economics prevailing at the time designated to achieve fiscal virtue are more hospitable to such tightening, do Mr. Bernanke and Ms. Yellen really believe that the politics will be any more auspicious? Can either cite an historic precedent, a time when the disparate desires of the majority who pay the bills a dollar at a time are not overwhelmed by the yelping of the minority on the receiving end of the largesse that comes millions, or billions, at a time? Put simply, handing out money is a lot easier than asking to get it back.

More generally, this entire “economy as a machine” approach, popularized by early Keynesians and, in our time, championed most ardently by the likes of Martin Feldstein and, apparently, Ben Bernanke, this idea that the economy will respond with precision to carefully calibrated inputs orchestrated by economic masterminds in Washington, D.C. has been, is now, and always will be preposterous. The economy is not a finely tuned mechanism that can be accelerated and decelerated at will by wise and beneficent philosopher kings on the banks of the Potomac. It is a living, breathing organism, the agglomeration of the hopes, shortcomings, aspirations, worst failures, and most monumental successes of billions of people who inhabit this complicated yet simple world. That Ben Bernanke, Janet Yellen, and their acolytes and henchmen think that somehow this time is different, that they, by the force of their overpowering intellects, can operate this economy as if it were a laptop computer, that they can somehow change the way the world has worked since the dawn of time is symptomatic of the hubris of my generation, a hubris that is leading us to what looks like certain ruin.