One supposes it was inevitable. After the agreement between Joe Biden and Kevin McCarthy resulted in the most microscopic of spending reductions, economists emerged with models meant to show the “job loss” that will result from slower economic growth born of reduced government spending.
Put another way, economist Mark Zandi made himself available for interviews. According to the pundit class’s favorite economist, the spending cuts initially demanded by Republicans would have revealed itself in 2.6 million jobs not created. You can’t make this up! At the same time, to say that Zandi’s latest analysis disappoints is to imply that he’s been reasonable in the past. No, he’s just been Mark Zandi, and on a clear day in economic pundit world, you can see Zandi forever.
Considering Zandi’s pre-agreement analysis alone, it was rooted in the incredibly simplistic notion that government, seemingly for being government, is some remarkable “other” capable of summoning resources from up above, down below, or somewhere not of this earth. Really, what else would explain Zandi’s economic “modeling” other than the magical existence of an “other” source of resources that the U.S. Treasury uniquely has access to?
Treasury is singled out with other governments around the world well in mind. If economic growth is as simple as Treasury providing Congress with copious funds, why don’t the Treasuries of Haiti, Peru and Zimbabwe do the very same? The question is rhetorical, but seemingly not when addressed to Zandi. He really and truly thinks government spending is the source of economic vitality. Which is why he fears any kind of federal spending cuts.
Writing on Twitter, Zandi observed about these truly immaterial proposed reductions in government outlays that it’s “Not the greatest timing for fiscal restraint as the economy is fragile and recession risks are high.” Except that periods of limp economic activity are logically the best time for a reduction in the government’s footprint. That is so because contra Zandi’s reasoning, government has no resources other than what it extracts from the private sector first. There’s no getting around this truth, which hopefully answers the above question about why Haiti, Peru and Zimbabwe’s legislators don’t just spend their people to prosperity as Zandi imagines they can.
Lost on Zandi is that government’s ability to spend is a consequence of economic growth, not a driver. To pretend as Zandi does that government spending adds to growth brings new meaning to double counting. And it puts the cart before the horse. Government can consume wastefully on concepts that restrain the creation of knowledge that is actual economic growth only after the wealth has been created. Call government a consumer of growth, not an instigator.
Yet Zandi fantasizes the opposite. His models tell him along with the simplistic minds that follow him that reductions of government wealth consumption that could emerge from a debt-limit deal will result in 120,000 fewer jobs in 2024 in concert with an unemployment rate that will be 0.1 percent higher. Once again, you can’t make this up.
What’s amazing is that Zandi is taken seriously. The details of his modeling were presented in straight-faced fashion by Jim Tankersley in the New York Times. Tankersley’s reporting and Zandi’s modeling presume that prosperity springs from Nancy Pelosi, Mitch McConnell, Joe Biden and Donald Trump allocating precious resources in place of individuals and businesses in the private sector.
In other words, central planning doesn’t just work, it’s a necessary instigator of economic growth. People really believe this, which means the reasonable must get better about presenting reality.