January 16, 2008
The official economic philosophy of the Democrats died last week, says the Wall Street Journal.
"Rubinomics" is the concept known as "deficit reduction" as growth policy: Lower the federal budget deficit and, as dawn follows night, interest rates will fall and prosperity will break upon the land. Named for former Treasury Secretary Robert Rubin, and much celebrated in the 1990s, the concept was embraced as gospel by nearly all Democrats as recently as a few weeks ago. But last week it officially expired, as those same Democrats reconverted to Keynesian deficit spending in the name of "economic stimulus."
- Rubin's successor as Treasury Secretary, Larry Summers, started the bidding with a $65 billion tax rebate and spending plan.
- Hillary Clinton saw that and raised, and now wants $40 billion in tax rebates and $70 billion in new spending for unemployment insurance, housing assistance, home heating subsidies and green technologies.
- Barack Obama joined the fray, proposing a $75 billion "stimulus" that would have the government send millions of Americans a check for $250, plus another $250 in bonus Social Security payments.
As a matter of policy, this passing is just as well, says the Journal:
- Rubinomics never did have much economic basis and even casual observation over the last 25 years has exposed its illogic.
- As deficits rose in the 1980s, interest rates fell; in the current decade, deficits rose and interest rates fell for a time, then later deficits fell but interest rates rose.
Another benefit of this Democratic disavowal of deficits is that we can now have a debate about what really "stimulates" an economy, says the Journal. The born-again Keynesians want to send checks to voters, who will spend or save the cash. Even if they spend it, however, any stimulus will be temporary and in any case even a $100 billion "injection" will count for little in a $13 trillion economy.
Source: Editorial, "Rubinomics R.I.P." Wall Street Journal, January 15, 2008.
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