The Underpants Gnome Theory Of Economic Recovery

Ken AshfordEconomy & Jobs & DeficitLeave a Comment

I hear/read this sort of thing a lot:

Unfortunately, too many people (mostly liberals) are of the opinion that only government can stimulate the economy. Mule fritters! The best thing government can do is to enable and empower, through getting people to go out and spend. Reduce business taxes to get companies to hire. Get out of the way so small businesses can be started. Etc.

This is stupid on hyperdrive.  You know why businesses aren't hiring?  It has nothing to do with business taxes.  It's because the economy sucks. 

Ask yourself this: why would a small business hire more employees at a time where there is record low demand for its product or service?  Answer: It wouldn't, and a business tax cut isn't going to change that.

And just how is government in the way of small businesses being started?  It's really not.  In fact, it is probably a great time to start a small business now (I'm sure real estate rents are very very low) — except that only a fool is going to start a small business in a bad economy.

Yes, it's the classic conservative answer to everything: less government and lower taxes.  They just assume that will cure all of our woes.  It's their answer to everything.

Underpants Gnome thinking at its best:

(1)   Less government and lower taxes
(2)  ????
(3)   Peace and prosperity, rainbows and unicorns for all