If you think that argument would be ridiculous, because it ignores the fact that the robber shot you in the first place and that you only survived because he didn't fully implement his original plan, consider that this is exactly the form of argument made by those who claim the Federal Reserve and "Obamanomics" deserve credit for "saving the economy." Businessweek's April cover story, Obama's Hot Hand: Why the Obama Plan is Working by Mike Dorning, is just one example. And just what is Obamanomics? Quoting Dorning:
For most of the past two decades, the reigning economic approach in Democratic circles has been Rubinomics, a set of priorities fashioned in the 1990s by Bill Clinton's Treasury Secretary, Robert E. Rubin, the former co-chairman of Goldman Sachs (GS). Broadly, Rubinomics was a three-legged stool consisting of restrained government spending, lower budget deficits, and open trade, which were meant in combination to reassure financial markets, keep capital flowing, and thus put the country on a path to prosperity.In other words, Obamanomics consists of spending more than you have, subsidizing inefficient or bankrupt businesses that sell products no one wants, quashing free trade, and denigrating or threatening the most productive members of society. One might ask, if Rubinomics once led to economic prosperity, how can Obamanomics, which is the exact opposite approach, lead to economic prosperity? Isn't that a contradiction? It doesn't matter. The robber saved your life. According to Dorning:
On the surface, Obamanomics couldn't be more different. The Administration racked up record deficits as it pursued a $787 billion fiscal stimulus on top of the $700 billion bailout fund for banks and carmakers. Obama has done close to nothing to expand free trade. And while Clinton pleased the markets with a moderate, probusiness image, Obama has riled Wall Street with occasional bursts of populist rhetoric, such as his slamming of "fat cat bankers" on 60 Minutes last December.
Little more than a year ago, financial markets were in turmoil, major auto companies were on the verge of collapse and economists such as Paul Krugman were worried about the U.S. slumbering through a Japan-like Lost Decade. While no one would claim that all the pain is past or the danger gone, the economy is growing again, jumping to a 5.6% annualized growth rate in the fourth quarter of 2009 as businesses finally restocked their inventories. The consensus view now calls for 3% growth this year, significantly higher than the 2.1 % estimate for 2010 that economists surveyed by Bloomberg News saw coming when Obama first moved into the Oval Office. The U.S. manufacturing sector has expanded for eight straight months, the Business Roundtable's measure of CEO optimism reached its highest level since early 2006, and in March the economy added 162,000 jobs—more than it had during any month in the past three years. "There is more business confidence out there," says Boeing(BA) CEO Jim McNerney. "This Administration deserves significant credit."Evidently, if any economic activity occurs, following and in spite of destructive policies, the Administration "deserves significant credit." And what if Obama had followed a different course, a course that encouraged deleveraging, failing businesses to declare bankruptcy, cuts in government spending, lower taxes, and decreased barriers to capital investment, i.e., economic freedom and the rule of law? What could have happened? The author does not ask this question. And what about the policies that caused the crisis to begin with, such as the Fed's easy money policy, government underwriting of mortgage loans, laws that encouraged loans to low income persons who could not afford them, government guarantees of checking accounts, and the like? Aren't these same institutions and policies still in place? Again, these questions are never asked by the modern economist. He simply observes positive GDP and busts out the champagne!
Arguments of the type made by Dorning commit the Fallacy of the Broken Window, conceived by Bastiat and popularized by Henry Hazlitt in his famous book, Economics in One Lesson. The lesson is that economists must not only focus on what actually happens but also account for the unseen or unintended consequences of an action throughout the entire economy. Economists who do not understand this principle, are the kind of economists who tell us that war, destruction, and broken windows are good for the economy, that "stimulus" creates prosperity, that unemployment insurance creates jobs, and that Obamanomics is "working."