Economic Fallacies on the Left and Right

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Barack Obama and Rick Santorum are equally confused when it comes to economics.

July 7, 2014

Rick Santorum and President Obama don’t agree on much. But on this point they are in accord: Whatever they want, it will do wonders for the economy.

Last month Santorum, the Republican former senator from Pennsylvania, spoke at the 2014 March for Marriage, where he told a reporter for Townhall.com why gay marriage is wrong: “When we continue to see a decline in marriage and a redefinition of marriage, you get less marriage. You get families that aren’t as strong, and as a result society generally, the economy suffers. ...” When you have less marriage, he went on, “then society struggles and suffers economically. ... So it’s important for us to stand up for ... what’s best for the economy.”

You don’t often hear such a thick goulash of nonsense, at least not outside of a New Orleans drunk tank. When you let more people marry, you get less marriage? Might need to see the math on that.

Santorum’s economic argument, meanwhile, defies gravity. It hovers in midair, with nothing whatsoever to hold it up. It might sound theoretically plausible—with enough imagination, anything could be said to affect the economy.

But empirically it is laughable. Economists still debate the effects of minimum wage hikes imposed many years ago—cases in which the variables are discrete and measureable. It is ludicrous to pretend anyone can divine the future economic effect of an amorphous social change, still much in progress, that touches upon everything from housing to tax collections.

And yet despite its gauziness—or, perhaps more accurately, because of it—the economy is the go-to argument for just about any topic under the sun.

In his State of the Union speech last year, Obama exhorted Congress to expand early childhood education. Why? Because he also had a bunch of plans to improve “manufacturing, energy, infrastructure, and housing”—but “none of it will matter unless we also equip our citizens with the skills and training to fill those jobs. And that has to start at the earliest possible age.”

It does? Preschool doesn’t usually include lessons on how to drive a forklift. But again, it sounds theoretically plausible that expanding early childhood education could someday boost the U.S. manufacturing sector. (And hey, just try to prove that it won’t!)

Theoretically plausible, however, is far from empirically demonstrable. When it comes to cause and effect, the president could not make even a much smaller claim without spiraling off into fiction. “Every dollar we invest in high-quality early childhood education,” he said, “can save more than seven dollars later on.” This was pure gasbaggery.

The claim rested on a couple of decades-old studies about two highly intensive and expensive experiments whose benefits are still debated. The federal government’s own studies of the Head Start program, meanwhile, have found it produced “little evidence of systematic differences.” Still, a 700 percent return on investment sure sounds good, doesn’t it?

You see claims like that all the time. Regarding the federal stimulus of Obama’s first term, a writer for The Nation averred that “building a clean energy economy will create three times more jobs within the U.S. than would spending on our existing fossil fuel infrastructure.” (He also called the claim “irrefutable.”) Nancy Pelosi agrees: Investing in “a green economy” is vital for “a brighter and more prosperous future,” she says.

Indeed, no discussion of green-energy policy is complete without copious assertions about how many jobs it will create and how much it will benefit the economy. Often those assertions are built on dubious assumptions (e.g., green jobs pay more) and often they ignore countervailing considerations (e.g., consumers who pay more for green energy will have less to spend elsewhere). Yet when, say, Solyndra promises to create hundreds or thousands of new jobs, environmentalists treat the self-serving claim with a pie-eyed credulity they never would apply to a claim from ExxonMobil.

A fundamental principle of economics is the concept of trade-offs: Everything carries a cost, even if it is only the cost of forgoing one opportunity to pursue another. Another basic notion is diminishing returns: A person caught in the rain finds one umbrella very useful. He finds a second umbrella less so. Yet somehow, miraculously, seemingly every government policy produces a net economic gain—and the more you spend on it, the bigger the gain will be.

High culture? According to a report by Americans for the Arts, the arts and culture industry “generates nearly $30 billion in revenue to local, state, and federal governments every year” even though government spends “less than $4 billion annually to support arts and culture—a spectacular 7:1 return on investment that would even thrill Wall Street veterans.” Ergo, “leaders who care about community and economic development can feel good about choosing to invest in the arts.” Well, there you go.

Government handouts to Hollywood? Virginia’s Film Office claims that for every $1 the state gives to film companies, it collects $12 in return. Spending more on the Department of Labor? It will, says Rep. Rosa DeLauro (D-Conn.), “save money in the long run.”

A. Barton Hinkle is senior editorial writer and a columnist at the Richmond Times-Dispatch.

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  • People ought go to theaters and art galleries to gasp in wonder at artistic brilliance and beauty—not because of the multiplier effect.

    That would require the creation of art. Something that has been notoriously lacking in high culture since WWI.

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  • See, this is the kind of moral equivalency I can get behind. "Obama is just as big an idiot as X."

    You should do more of these.

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  • Santorum? Why anyone bothers about this has-been nearly-never-was is beyond me.

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  • In other words, Hinkle explains, [Politician's name here] and Obama are equally illiterate when it comes to understanding basic economics.

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  • ***argh*****

    [Enter politician's name here]

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  • Scruffy Nerfherder

    That picture needs a trigger warning

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  • "Neil deGrasse Tyson believes in space exploration because of its glorious scientific promise—not because it might be good for Lockheed-Martin."

    No, NdGT believes in space exploration because it is good for his career and he's probably more worried about the bottom line of Lockheed than he is about glorious scientific promise otherwise he'd be demanding we stop backing Nasa and start real private exploration of space.

    One could make an argument that NASA was necessary through the 80's but by 1990 at the latest they had become more of an impediment to human space exploration than a driving force of it.

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  • EDG reppin' LBC||#

    Is Rick Santorum a Secret Libertarian?

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  • Libertarian||#

    Yes. Deep cover. Deep, DEEP cover.

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  • antisocial-ist||#

    The one kernel of truth in Santorum's burrito of bull shit. Married men tend to be more productive and save more than single men, controlling for other variables. Why straight men would stay single because of gay marriage is beyond me, but I'm sure he thought he was making a point somewhere in that word salad.

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  • Faceless Commenter||#

    Also, all the stats about kids in two-parent (as opposed to mommy-only) families. This is undeniable. Santorum, however, thinks that gay marriage corrodes all marriage and family life, and he don't need to stinking empirical evidence.

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  • Notorious G.K.C.||#

    So you *don't* think Santorum was alluding to the problem of fatherlessness and single-mother "families?"

    http://townhall.com/tipsheet/t.....4-n1853633

    Basically, the point seems to be that Santorum is technically right but culturally icky.

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  • Francisco d'Anconia||#

    Whose "problem" is it?

    It's quite frankly none of Ricky's business.

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  • Notorious G.K.C.||#

    It's a problem if the government is subsidizing non-marital households and forcing people to bake cakes for such households.

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  • sarcasmic||#

    “The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”

    ― Thomas Sowell

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  • Francisco d'Anconia||#

    But, Obama is a libertarian.

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  • The Last American Hero||#

    He is an admitted drug user, which according to some, is a prerequisite.

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  • Redbeard||#

    Dammit, and here I was thinking myself and my straight edge friends were welcome in the libertarian movement. Guess we better go find our friendly neighborhood drug dealer.

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  • sarcasmic||#

    The implication is that people who smoke weed look for a political philosophy that justifies their drug use. "Yeah, man. Libertarians want to legalized the bud, man. I'm like totally a Libertarian because, you know, what was I saying? Oh yeah, uh, shit. I forgot what I was talking about. Oh, hey. I heard there's this political party that wants to legalize the bud."

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  • JohnZeus||#

    "Theoretically plausible, however, is far from empirically demonstrable. When it comes to cause and effect, the president could not make even a much smaller claim without spiraling off into fiction."

    Isn't that the basis of all politics? Perception and "sounds good" are the motivation to vote in the minds of, I would venture, the vast majority of people in America.

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  • Joao||#

    Lots of good points, but you start off defying your own logic.

    You chide Santorum on trying predicting economic effects of social change where u previously deny his claim that there will be less marriage when more can marry.

    So first, you say one prediction is false, but then you say it is silly to try to predict at all (on another matter). Both cannot be true; this is bias.

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  • OldMexican||#

    Economists still debate the effects of minimum wage hikes imposed many years ago


    That's not true. Most economist agree that labor obeys the Law of Supply and Demand just like any other scarce resource, whereas the leftist economists call the Law of Supply and Demand something the Devil farted from his arse.

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  • sarcasmic||#

    Supply and demand doesn't apply to people because that's an icky thing to say.

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  • thom||#

    I think the current spin is that while supply and demand do affect labor markets, the effect on unemployment is so minor that from a policy perspective, those effects are immaterial.

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  • Bill Dalasio||#

    Hinkle's takedown of Santorum's idiocy seems kind of strange. There's a pretty solid body of research suggesting that marriage is good for the economy in the long term (increased productivity and savings rates). So, he's actually on somewhat solid ground there. What flies in the face of even basic economics is his first claim, that permitting gay marriage will diminish the quantity of marriage consumed. To get there you have to assume increases in supply (of marriages) result in lowered consumption.

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  • Notorious G.K.C.||#

    If you're trying to roll back previous "reforms" of marriage, like no-fault divorce and subsidized single parenthood, you're first going to have to establish that marriage is more than a smoochy romantic affair between two (or more) people, but that it's a union between men and women uniquely ordered for producing healthy children.

    Accepting gay marriage is to reject this idea and make it that much more difficult to roll back previous reforms.

    And meanwhile, the SSM crowd wants cake and is willing to penalize and fine you until it gets it.

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  • Notorious G.K.C.||#

    The interview with Santorum -

    http://townhall.com/tipsheet/t.....4-n1853633

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  • Notorious G.K.C.||#

    I think there's a bit of a knee-jerk reaction to any mention of Rick Santorum.

    "Ha ha, Rick Santorum sure reminds me of a byproduct of sodomy, lol, what did that asshole say *this* time?"

    "He said have a nice day."

    "Why, that fascist! Who is he to tell me what kind of a day to have? If I want to have a nice day I'll have one, and if I don't I won't, and I won't let some bigoted nazi closeted homosexual tell me what to do!"

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