'Do no harm'

The first Law of Medicine needs to be applied to the economy, says Nobel economist Gary Becker.

Noteworthy:

"He returns to the perniciousness of Treasury's inconsistency.

I do believe that in a risky environment which is what we are in now, with the market pricing risk very high, to add additional risk is a big problem, and I think this is what we are doing when we don't have consistent policies. We add to the risk.

On the subject of recovery, Mr. Becker repeats his call for lower taxes, applauds the Fed's action to 'raise reserves,' (meaning money creation, though he said this before the Fed's action a few days ago), and he says 'I do believe one has to try to do something more directly to help with the toxic assets of the banks.'

How about getting rid of the mark-to-market pricing of bank assets [that is, pricing assets at the current market price] that some say has destroyed bank capital? Mr. Becker says he 'prefers mark-to-market over pricing by cost because costs are often completely out of whack with what the real prices are.' Then he adds this qualifier:

But when you have a very thin market, you have to be very careful about what it means to mark-to-market. . . . It's a big problem if you literally take mark-to-market in terms of prices continuously based on transactions when there are very few transactions in that market. I am a mark-to-market person but I think you have to do it in a sensible way.'

...and:

Mr. Becker is underwhelmed by the stimulus package:

Much of it doesn't have any short-term stimulus. If you raise research and development, I don't see how it's going to short-run stimulate the economy. You don't have excess unemployed labor in the scientific community, in the research community, or in the wind power creation community, or in the health sector. So I don't see that this will stimulate the economy, but it will raise the debt and lead to inefficient spending and a lot of problems.

There is also the more fundamental question of whether one dollar of government spending can produce one and a half dollars of economic output, as the administration claims. Mr. Becker is more than skeptical.

Keynesianism was out of fashion for so long that we stopped investigating variables the Keynesians would look at such as the multiplier, and there is almost no evidence on what the multiplier would be.

He thinks that the paper by Christina Romer, chairman of the Council of Economic Advisors, 'saying that the multiplier is about one and a half [is] based on very weak, even nonexistent evidence.' His guess?

I think it is a lot less than one. It gets higher in recessions and depressions so it's above zero now but significantly below one. I don't have a number, I haven't estimated it, but I think it would be well below one, let me put it that way.'"

Not that Team Zero actually has the smarts or the integrity to figure these things out, and apply these thoughts to fixing the nation's problems.

They're more intent upon ramming their political, social, and economic agenda items through to increase their power and control instead of acting in our country's best interests.

For them, it's just business as usual.

That's no big surprise for those of us who have been paying attention.

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