Lecture 17. HONESTY vs DISHONESTY

Lecture 17. HONESTY vs DISHONESTY
There are two sides in this war of words, but it’s not
simply a battle between pro-Keynesians and anti-Keynesians.
It is also a war between politicians and economists. It is
a struggle between those seeking power and willing to say
anything to obtain power and those who have already
reached the top of their profession and must not say
anything that will harm their reputation.

The politician uses ambiguity to imply facts that are
false. The economist sees complexity and chooses words 
that convey only probabilities of truth. In the eyes and 
ears of the lay public, the politician is direct while the 
economist is evasive. The politician often wins out over 
the economist.
 
Above all else, we need honest leaders. Dishonesty is a 
leader’s most dangerous character flaw.

Dishonesty gave us lies about the puppet government 
imposed upon Vietnam by the French Foreign Legion and an
imagined radar blip and the Tonkin Bay Resolution and 
escalation and napalm-burned children and a trillion 
dollars lost and millions of lives lost and a hundred 
million lives ruined and a black, name-chisled 
mourner’s wall in our nation’s capital.

Dishonesty gave us Bush's refusal to lock the pilot's door
of commercial airliners as the Israeli airline had done
for twenty years before 9/11 without a single hijacking
attempt. Bush preferred to allow the occurrence of a
threatened and well-advertised hijacking to give himself
emergency popularity and powers leading to tax cuts and
the invasion of Iraq. That the World Trade Center was
destroyed and the Pentagon damaged and thousands of
lives lost was an unexpected high cost, but it did
produce the tax cuts and the opportunity to invade Iraq.

Dishonesty gave us Bush's lies about “yellow cake” and
UN inspectors forbidden to look for WMD in Iraq and 
shock and awe and Abu Ghraib and seven years of criminal 
neglect in Afghanistan and trillions of dollars lost and a
quarter-million lives lost and fifty million lives ruined 
and more to come.
 
Dishonesty in a leader is always costly and often deadly,
but never obvious.  In the struggle for power, lies must 
be very subtle.

Typical is a subtle lie about ARRA that has been rampant 
on the political scene.  Please look closely at the 
details and see the dishonesty.  By exposing the lie, we
make the liars expose themselves.

The history of this lie began before the November, 2008 
election.  While the economy was melting down, Obama asked
two of his economists, Christine Romer and Jared Bernstein
(R&B), to prepare and simulate a recovery program.The R&B 
report was issued January 10, 2009,before Obama
took office.
 
It consists of a dozen pages written in simple English, 
with a few data tables and one graph.  The data were 
generated by a well-known, widely respected computer model
of the economy. Based upon results, the graph plots a time
line for each of two expected unemployment rates: “with
recovery plan” and “without recovery plan”. The time
period at issue starts shortly after the beginning of the
stimulus spending.  As the two curves diverge, the graph
shows the advantage of “with recovery plan” over “without
recovery plan” during a five-year period following the
point of divergence.

                                  !
                                  !
                                  !
                                  !
                      Start of Stimulus Spending

While the economy was collapsing in 2009, the input data 
to the computer model required R&B to hastily predict 
the unemployment rate at the beginning of stimulus 
spending, six months into the future.  On the first page 
of the report, R&B state:

   "It should be understood that all
    the estimates presented in this model
    are subject to significant margins of
    error."

On the last page of the report, the first line states: 


  “Forecasts of the unemployment rate
   without the recovery plan vary
   substantially.”

As required input data, R&B used the CBO projection that
the economy would lose up to four million jobs during
the following six month before the stimulus spending
began.  The CBO was wrong.  They underestimated the
severity of the collapse.  The economy actually lost
over six million jobs during the six months.

Using the CBO estimate was their only mistake.
Otherwise, their model correctly predicted the
advantage of the “with recovery plan” over “without
recovery plan”.  In terms of measured GDP increase,
the data generated by the model correspond well with
actual results in our economy. The “with recovery
plan” yields an unemployment rate up to 2% less
than “without recovery plan”. That is the central result.
R&B can be justly proud of their work.

Conservative leaders and journalists are well-educated, 
intelligent individuals. All have read the R&B report.
They understand it perfectly.  They know that the model 
correctly predicted (according to the Congressional Budget
Office) the amount of GDP rise and the number of jobs 
saved or created, which was the entire purpose of the 
simulation.
 
They know that the derived maximum unemployment rate was 
absolutely incidental and utterly unimportant, being based 
entirely upon the initial guess and subject to
“significant margins of error”.  Yet the conservative
leaders and journalists repeatedly say:

   “Obama said that if we pass the stimulus bill,
   the unemployment rate would not rise over 8%.
   It is now well over 9%. Obama made a mistake.
   Therefore, the stimulus program didn‘t succeed.
   Therefore, we don‘t need another stimulus.
   Therefore you should elect those who opposed
   the stimulus.”

This is simply a lie consisting of a distorted,
irrelevant fact followed by ludicrously false logic. The
stimulus succeeded by paying for itself in hard cash.
That is all that we can ask from a stimulus.
 
If R&B had correctly guessed the unemployment rate six
months into the future, the ARRA gains would not have been
improved.  The conservative leaders and journalists who 
knowingly repeat this lie believe that the voters will 
accept it as the truth because it is so subtle. How 
cynical!

These cynics would never return a functioning air-
conditioner to a dealer when the temperature is over 120F.
They would ask the dealer to recommend more cooling
capacity. They rely on the voter's lack of economic
knowledge to spread the lie that an insufficient stimulus
“made the economy worse.”

Voters who understand the above know the danger and the
cost of electing liars to high office: trillions of dollars
lost and millions of live lost and hundreds of millions
of lives ruined. 
 
With the above information, voters should also recognize 
the liars. If so, they certainly have the duty to act on 
that knowledge.

    “...and ye shall know the truth,
   and the truth shall make you free.”
     John 8:32.
Proceed to:
Lecture 18. WEALTH vs POVERTY
Thanks for your interest.
  Marvin Sussman, retired engineer

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