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RELIGION and PUBLIC LIFE, Reno

Religion and Public Life – Russell R. Reno
“RUSTY RENO is the editor of First Things, a journal of religion in public life. He received his B.A, from Haverford College and his Ph.D. in religious studies from Yale University, and taught theology and ethics at Creighton University in Omaha, Nebraska, for 20 years, He is the author of Fighting the Noonday Devil, Sanctified Vision, and a commentary on the Book of Genesis, as well as a number of other books and essays.”

“The following is adapted from a speech delivered by Professor Reno on February 20, 2013, at a Hillsdale College National Leadership Seminar in Bonita Springs, Florida.”

“RELIGIOUS LIBERTY is being redefined in America, or at least many would like it to be. Our secular establishment wants to reduce the autonomy of religious institutions and limit the influence of faith in the public square. The reason is not hard to grasp. In America, “religion” largely means Christianity, and today our secular culture views orthodox Christian churches as troublesome, retrograde, and reactionary forces. They’re seen as anti-science, anti-gay, and anti-women-which is to say anti-progress as the Left defines progress. Not surprisingly, then, the Left believes society will be best served if Christians are limited in their influence on public life. And in the short run this view is likely to succeed. There will be many arguments urging Christians to keep their religion strictly religious rather than “political.” And there won’t just be arguments; there will be laws as well. We’re in the midst of climate change-one that’s getting colder and colder toward religion.

Recent court cases and controversies suggest trends unfriendly to religion in public life. In 2005, a former teacher at Hosanna-Tabor Evangelical Lutheran Church and School in Redford, Michigan, filed an employment lawsuit claiming discrimination based on disability. The school fired her for violating St. Paul’s teaching that Christians should not bring their disputes before secular judges. The subsequent lawsuit revolved around the question of whether a religious school could invoke a religious principle to justify firing an employee. The school said it could, drawing on a legal doctrine known as the ministerial exception, which allows religious institutions wide latitude in hiring and firing their religious leaders. It’s in the nature of legal arguments to be complex and multi-layered, but in this case the Obama administration’s lawyers made a shockingly blunt argument: Their brief claimed that there should be no ministerial exception..

The Supreme Court rejected this argument in a unanimous 9-0 vote. But it’s telling nonetheless that lawyers in the Justice Department wanted to eliminate this exception. Their argument was straightforward: Government needs to have broad powers to address the problem of discrimination-in this case disability-as well as other injustices. Conceding too much to religious institutions limits those powers. Why should the theological doctrines of the Lutheran Church-Missouri Synod, or of any other church, trump the legal doctrines of the United States when the important principle of non-discrimination is at stake? It is an arresting question, so say the least-especially when we remember that the Left is currently pushing to add gay marriage to the list of civil rights.

Concerns about the autonomy of religious institutions are also at work in the Obama administrations tussle with the Catholic Church and her religious allies over the mandate to provide free contraceptives, sterilization, and abortion inducing drugs. After the initial public outcry, the administration announced a supposed compromise, which has been recently revised and re-proposed. The Obama administration allows that churches and organizations directly under the control of those churches are religious employers and can opt out of the morally controversial coverage. But religious colleges and charities are not and cannot. To them, the administration offers a so-called accommodation.

The details are complex, but a recent statement issued by Cardinal Dolan of New York identifies the key issue: Who counts as a religious employer? It’s a question closely related to the issue in the Hosanna-Tabor case, which asks who counts as a religious employee. Once again the Obama administration seeks a narrow definition, “accommodating” others in an act of lese majeste, as it were. The Catholic Church and her allies want a broad definition that includes Catholic health care, Catholic universities, and Catholic charities, The Church knows it cannot count on accommodations- after all, when various states such as Illinois passed laws allowing gay adoptions, they did not “accommodate” Catholic charities, but instead demanded compliance with in elite culture. A great deal of higher education is dominated by Nones, as are important cultural institutions, the media, and Hollywood. They are conscious of their power, and they feel the momentum of their growth. At the same time, the number of Americans who say they go to church every week has remained strikingly constant over the last 50 years, at around 35 percent. Sociologists of religion think this self-reported number is higher than the actual one, which may be closer to 25 percent. In any event, the social reality is the same. As the Nones have emerged as a significant cohort, the committed core of religious people has not declined and in fact has become unified and increasingly battle tested. Protestants and Catholics alike know they’re up against an often hostile secular culture-and although a far smaller portion of the population, the same holds for Jews and Muslims as well.

These two trends-the rise of the Nones and the consolidation of the committed core of believers,-have led to friction in public life. The Nones and religious Americans collide culturally, and politically, not just theologically.

For a long time, the press has reported on the influence of religious voters, especially Evangelicals. Polling data shows that religiosity has become increasingly reliable as a predictor of political loyalties. But what’s far less commonly reported is that this goes both ways. In their recent book, American Robert Putnam and William Campbell focused on the practice of saying grace before meals as an indication of religious commitment and found a striking correlation. Seventy percent of those who never say grace before meals identify as Democrats, compared to slightly more than 20 percent who identify as Republicans. Nones are extremely ideological. Meanwhile, among those who say grace daily, 40 percent identify as Democrats and 50 percent as Republicans. Religious people are more diverse, but they trend to the political right, and the more religious they are the more likely they are to vote Republican.

Other data also suggests avowing divide between the irreligious and religious. A recent Pew study confirms that Nones are the single most ideologically committed cohort of white Americans, rivaled only by Evangelical Protestants. They overwhelmingly support abortion and gay marriage. Seventy-five percent of them voted for Barack Obama in 2008, and they played a decisive role in his victory in 201.2. In Ohio, Obama lost the Protestant vote by three percent: and the Catholic vote by eleven percent-and both numbers rise if we isolate Protestants and Catholics who say they go to church every week. But he won the Nones, who make up 12 percent of the electorate in Ohio, by an astounding 47 percent.

I think it’s fair to say that Obama ran a values campaign last fall that gambled that the Nones would cast the decisive votes. For the first time in American political history, the winning party deliberately attacked religion. Its national convention famously struck God from the platform, only to have it restored by anxious party leaders in a comical session characterized by the kind of frivolity that comes when people recognize that it doesn’t really matter. Democratic talking points included the “war on women” and other well-crafted slogans that rallied their base, the Nones, who at 24 percent, of all Democrat and Democratic-leaning voters have become the liberal coalition.

This presents the deepest threat to religious liberty today. It’s not good when the most numerous and powerful constituency in the Democratic Party has no time for religion. This is all the more true when its ideology has the effect of encouraging the rest of the party to view religion-especially Christianity-as the enemy. And when law professors provide reasons why the Constitution doesn’t protect religious people.

Religious Liberty Under the Gun

From the end of the Civil War until the 1960s, the wealthiest, best educated, and most powerful Americans remained largely loyal to Christianity. That’s changed. There were warning signs. William F. Buckley, Jr. chronicled how Yale in the early ’50s could no longer support even the bland religiosity of liberal Protestantism, Today, Yale and other elite institutions can be relied upon to provide anti-Christian propaganda. Stephen Pinker and Stephen Greenblatt at Harvard publish books that show how Christianity pretty much ruins everything, as Christopher Hitchens put it so bluntly. The major presses publish book after book by scholars like Elaine Pagels at Princeton, who argues that Christianity is for the most part an invention of power hungry bishops who suppressed the genuine diversity and spiritual richness of early followers of Jesus.

One can dispute the accuracy of the books, articles, and lectures of these and other authors. This is necessary, but unlikely to be effective. Experts savaged Greenblatt’s book on Lucretius, The Swerve, but it won the National Book Award for non-fiction. That’s not an accident. Greenblatt and others at elite universities are serving an important ideological purpose by using their academic authority to discredit Christianity, whose adherents are obstacles not only in the fight over abortion and gay rights, but to medical research unrestricted by moral concerns about the use of fetal tissue, new reproductive technologies, doctor-assisted suicide, and in general to liquefying traditional moral limits so that they can be reconstructed according to the desires and needs of the Nones, Books by these elite academics reassure the Nones and their fellow travelers that they are not opposed to anything good or even respectable, but rather to historic forms of oppression, ignorance, and prejudice. I cannot overstate the importance of these ideological attacks on Christianity. Our Constitution accords us rights, and the courts cannot void these rights willy-nilly. But history shows that the Constitution is a plastic document. When our elite culture thinks something is bad for society as a whole, judges find ways to suppress it. The First Amendment offered no protection to Bob Jones University, which lost its tax-exempt status because of a policy that prohibited interracial dating. As the Supreme Court majority in 1983 wrote in that case: “Government has a fundamental, overriding interest in eradicating racial discrimination in education, .. which substantially outweighs whatever burden denial of tax benefits places on [the University’s] exercise of their religious beliefs.”

In recent years the Supreme Court has been largely solicitous of religious freedom, sensing perhaps that our cultural conflicts over religion and morality need to be kept within bounds. But the law professors are preparing the way for changes. Martha Nussbaum, who teaches at the University of Chicago Law School, has opined that the colleges and universities run by Catholic religious orders that require their presidents or other leaders to be members of the order should lose their tax exempt status, because they discriminate against women. She allows that current interpretations of the First Amendment don’t support her view, but that’s not much comfort. All Nussbaum is doing is applying the logic of the Bob Jones case to the feminist project of eradicating discrimination based on sex.

Former Georgetown law professor Chai Feldblum-who is also a current Obama appointee to the Equal Employment Opportunity Commission-has written about the coming conflicts between gay rights and religious liberty. With an admirable frankness she admits, “I’m having a hard time coming up with any case in which religious liberty should win.” Again, the Bob Jones case is in the background, as are other aspects of civil rights law designed to stamp out racial discrimination. For someone like Feldblum, when religious individuals and institutions don’t conform to the new consensus about sexual morality, their freedoms should be limited.

It is precisely the possibilities evoked by Nussbaum and Feldblum that now motivate the Obama administration’s intransigence about, allowing places like Notre Dame to be classified as religious employers. In the Bob Jones case, the justices were very careful to stipulate that “churches or other purely religious institutions” remain protected by the First Amendment’s principle of free exercise. By “accommodating” rather than counting. Notre Dame and other education and charitable organizations as religious employers, secular liberalism can target them in the future, as they have done to Catholic adoption agencies that won’t place children with homosexual couples.

A recent, book by University of Chicago professor of philosophy and law Brian Leiter outlines what I believe will become the theoretical consensus that does away with religious liberty in spirit if not in letter. “There is no principled reason,” he writes, “for legal or constitutional regimes to single out religion for protection. “Leiter describes religious belief as a uniquely bad combination of moral fervor and mental blindness, serving no public good that justifies special protection. More significantly-and this is Letter’s main thesis-it is patently unfair to afford religion such protection.

Why should a Catholic or a Baptist have a special right while Peter Singer, a committed utilitarian, does not? Evoking the principle of fairness, Leiter argues that everybody’s conscience should be accorded the same legal protections. Thus he proposes to replace religious liberty with a plenary “liberty of conscience.”

Leiters argument is libertarian. He wants to get the government out of the business of deciding whose conscience is worth protecting. This mentality seems, to expand freedom, but that’s an illusion. In practice it will lead to diminished freedom, as is always the case with any thoroughgoing libertarianism.

Let me give an example. The urban high school my son attended strictly prohibits hats and headgear, It does so in order to keep gang-related symbols and regalia out of the school. However, the school recognizes a special right of religious freedom, and my son, whose mother is Jewish and who was raised as a Jew, was permitted to wear a yarmulke. Leiter’s argument prohibits this special right, but his alternative is unworkable. The gang members could claim that their deep commitments of loyalty to each other create a conscientious duty to wear gang regalia. If everybody’s conscience must be respected, then nobody’s will be, for order and safety must be preserved.

The Arabic word dhimmi means non-Muslim. Under Muslim rule, non-Muslims were allowed to survive only insofar as they accepted Muslim dominance. Our times are not those times, and the secularism of the Nones is not Islam. Nevertheless, I think many powerful forces in America would like to impose a soft but real dhimmitude. The liberal and libertarian Nones will quarrel, as do the Shi’a and Sunni, but they will, I think largely unify against the public influence of religion.

What can be done to prevent them from succeeding?

First and most obvious–defend religious liberty in the courts. Although I have depicted deep cultural pressures that work against religious liberty, we live in a society governed by the rule of law. Precedent matters, and good lawyering can make a substantive difference.

Second–fight against the emerging legal theories that threaten to undermine religious liberty. This is a battle to be carried out in the law schools and among political, theorists. For decades, legal activists on the Left have been subsidized by legal clinics and special programs run in law schools. Defenders of religious liberty need to push back.

Third–Fight the cultural battle. The U.S. Constitution flexes and bends in accord with the dominant consensus. This Brian Leiter knows, which is why he does not much, worry about the current state of constitutional law. He goes directly to the underlying issues, which concern the role of religion in public life.

We must meet the challenge by showing that religion is indeed special. Religious people are the most likely Americans to be involved in civic life, and the most generous in their charitable contributions. This needs to be highlighted again and again. Moreover, we need to draw a contrast with the Nones who tend to outsource their civic responsibilities and charitable obligations to government in the form of expanded government programs and higher taxes.

“There is another, deeper argument that must be made in defense of religion: It is the most secure guarantee of freedom. America’s Founders, some of them Christian and others not, agreed as a matter of principle that the law of God trumps the law of men. This has obvious political implications: The Declaration of Independence appeals to the inalienable rights given by our Creator that cannot be overridden or taken away. In this sense, religion is especially beneficial. As Popes John Paul II and Benedict XVI emphasized on many occasions, it gives transcendent substance to the rights of man that limit government. Put somewhat differently, religion gives us a place to stand outside politics, and without it we’re vulnerable to a system in which the state defines everything, which is the essence of tyranny. This is why gay marriage! which is sold as an expansion of freedom, is in fact a profound threat to liberty.

Finally, we must not accept a mentality of dhimmitude. The church, synagogue, and mosque have a tremendous solidity born of a communion of wills fused together in obedience to God. This gives people of faith the ability to fight with white fury for what they perceive to be a divine cause which is of course a great force for righteousness–but also a dangerous threat to social peace, as early modern Europe knew only too well.

In conclusion? I want to focus not on fury but on the remarkable capacity for communities of faith to endure. My wife’s ancestors lived four generations in the contested borderlands of Poland and Russia. As Jews they were tremendously vulnerable, and yet through their children and their children’s children they endured in spite of discrimination, violence, and attempted genocide. Where now, I ask, are the Russian and Polish aristocrats who dominated them for centuries? Where now is the Thousand Year Reich? Where now is the Soviet worker’s paradise? They have gone to dust. The Torah is still read in the synagogue.

The same holds for Christianity. The Church did not need constitutional protections in order to take root in a hostile pagan culture two thousand years ago.

Right now the Nones seem to have the upper hand in America. But what seems powerful is not always so. It I had to bet on Harvard or the Catholic Church, Yale or the Mennonites in Goshen, Indiana, the New York Times or yeshivas in Brooklyn, I wouldn’t hesitate. Over the long haul, religious faith has proven itself the most powerful and enduring force in human history.”

A publication of IMPRIMUS, of Hillsdale College, over 2,600,000 readers monthly, April 2013 . Volume 42, Number 4

Permission to reprint in whole or m part is hereby granted, provided the following credit line is used: “Reprinted by permission from Imprimis a publication of Hillsdale College.” Copyright © 2013 Hillsdale College. The opinions expressed in Imprimis are not necessarily the views of Hillsdale College. Imprimis trademark registered m U.S. Patent and Trademark Office #1563325 Subscription Free Upon Request – ISSN 0277-8432 ”

FAITH-BASED ECONOMICS, A KEYNES’ COMEBACK ?

Faith-Based ECONOMICS, A Keynes’ Comeback? by Alan Reynolds

Keynes makes a comeback, but his ideas are still wrong

A recent Wall Street Journal article describes “the new old big thing” in economic policy: “Around the world . . . policy makers are invoking the ideas of British economist John Maynard Keynes … who argued that governments should fight the Great Depression in the 1930s with heavy spending.” In the New York Times Magazine, Robert Skidelsky appoints Keynes “”man of the year.”” Robert Reich, labor secretary under President Clinton, praises the “rebirth of Keynes.” Long before Keynes published The General Theory of Employment, Interest and Money in 1936, he was a highly persuasive  and witty writer on economic issues, often appearing in London newspapers and talking on the radio. But that was very long ago, and Keynes died in 1946. Economics has since become less reliant on armchair theorizing and more deeply grounded in statistical fact.

Using quaint Keynesian arguments to rationalize heavy spending is nothing new. But its resurgent popularity is somewhat surprising. Democrats and their favorite economists spent the past 25 years bemoaning the “twin deficits” of the 1980s and then claimed that the strong economy of the late 1990s was the result of President Clinton’s fiscal restraint-the precise opposite of “fiscal stimulus.” Also working in the anti-Keynesian mode, former treasury secretary Robert Rubin co-authored a 2004 paper with forecaster Allen Sinai and Peter Orzsag of the Brookings Institution, who now has been tapped by Obama to lead the Office of Management and Budget. They argued that “budget deficits decrease national saving, which reduces domestic investment and increases borrowing abroad.” Big budget deficits, warned Rubin, Orzsag, and Sinai, would “reduce future national income” and risk a “decline in confidence [which] can reduce stock prices.”  Democrats´ anxieties about future deficits had abated only slightly by January 2008, when the incoming head of the Congressional Budget Office, Douglas Elmendorf, co-authored a Brookings paper with Jason Furm an, nominated deputy director of Obama’s National Economic Council. They strongly favored monetary stimulus over fiscal stimulus, and they warned that “it is critical that efforts to fight a recession do not end up increasing the long-run budget deficit and thus harming long-run growth.” Elmendorf and Furman rightly noted that “the idea that Congress should make legislative changes to tax or spending policies in order to counter the business cycle has fallen into disfavor among economists.”

In November 2000, for example, Skidelsky wrote in The Economist that “what survives today of Keynesian economics is … Keynes’s intuition that… the source of instability lies in the logic of financial markets.” In other words, not much. Skidelsky noted that “monetary policy has supplanted fiscal policy as a short-term stabilizer.” And he concluded that deep experience with governments´ “capacity for error and folly suggests that discretionary policy should be used very sparingly.”

Many of the economists who repeatedly prophesied in ominous fashion about the dangers of relatively trivial deficit spending during the Reagan and Bush years have inexplicably become enthusiastic supporters of deficits likely to exceed 10 percent of GDP during the Obama administration. If asked about this remarkable political agility, they would probably say their change of heart comes because (1) some forecasters now say this recession is going to be extremely long and deep, and (2) the Fed doubled the monetary base (bank reserves and currency) from September to December, but that action did not produce instant recovery.

John Kenneth Galbraith had advice for the first point: “Never base policy on a forecast.” As recently as August, some prominent forecasters were warning of runaway inflation and urging the Fed to tighten. Forecasters failed to predict the financial crisis in September and today have no idea how long or how deep the recession will be. They’re making guesses.

On the second point, the lagging effects of monetary policy can take some time to become apparent. The U.S. economy does not turn on a dime. Some are arguing that what the Fed is doing will be both ineffective and inflationary, which is contradictory.
My advice: Never underestimate the Fed.

Keynes was not quite as skeptical of the efficacy of monetary policy as many of his followers have become. He wrote that the effect of increasing the quantity of money is “not nugatory,” and that “the terms on which the monetary authority will change the quantity of money enters as a real determinant into the economic scheme.” But by the 1960s, Keynes’s apostles were minimizing the role of monetary policy and exaggerating the apparently magical properties of government borrowing. Inflation was considered a useful lubricant in the machinery of full employment. In the late 1960s and 1970s, rising inflation was routinely described by a thermal metaphor (“overheating”), and regarded as a social problem to be endlessly fought with fiscal policy (a surtax) and with income policy (wage/price controls), but never with monetary policy.

Milton Friedman’s 1967 address to the American Economic Association described how Keynesian theorizing had come to underestimate the power of the Federal Reserve: Keynes offered simultaneously an explanation for the presumed impotence of monetary policy to stem the Depression, a non-monetary interpretation of the Depression, and an alternative to monetary policy for meeting the Depression, and his offering was avidly accepted… . The wide acceptance of these views in the economics profession meant that for some two decades monetary policy was believed by all but a few reactionary souls to have been rendered obsolete by new economic knowledge. Money did not matter. Its only role was the minor one of keeping interest rates low, in order to hold down interest payments in the government budget, contribute to the “euthanasia of the rentier,” and maybe stimulate investment a bit to assist government spending in maintaining a high level of aggregate demand.

Unlike Keynes´s 1930 Treatise on Money, his General Theory offered no coherent theory of inflation or the price level but instead treated nominal and real income as the same thing. He suggested that “an increase in the quantity of money will have no effect whatever on prices, so long as there is any unemployment.” That idea was later formalized in the Phillips Curve tradeoff, whereby lower unemployment could supposedly be achieved through higher inflation. The results of that policy bias were the disastrous inflationary recessions of 1974-75 and 1980-82.

In 1978, future Nobel laureate Robert Lucas Jr. wrote an obituary for these ideas, “After Keynesian Economics,” along with Thomas Sargent of the University of Minnesota. They showed that “Keynesian… predictions were wildly incorrect and that the doctrine on which they were based is fundamentally flawed.” The hubris of expert demand-management through fiscal policy should have suffered
a permanent loss of credibility 30 years ago. But memory is short.

ONE reason Keynesian theorizing never quite disappears is that our national-income model deliberately incorporates Keynesian concepts. Keynes described the overall economy in terms of how money is spent rather than how it is earned. He divided national income into a few arbitrary accounting categories, describing income (denoted by the letter “Y”) as being spent for consumption (“C”), investment (“I”), government (“G”), and net imports (“X”). Ignoring foreign trade, as Keynes usually did, this yields the famous equation:  Y=C+I+G “The decisions to consume and the decisions to invest,” he wrote, “between them determine incomes.” The theory remains much too popular–because it is much too simple. Keynes’s discussion of consumption makes no distinction between durable and nondurable goods, and regards consumption as dependent on current income alone, not wealth. Yet young people clearly consume out of human capital (expected future income) and seniors consume out of accumulated financial capital.

How many times have we read the demand-side fallacy – namely, that economic growth “depends on” consumption, because consumption accounts for 70 percent of GDP? To say that income growth depends on consumption would be absurdly circular even in Keynesian terms, because Keynes argues that consumption depends on income. In reality, Keynes attributed sudden gyrations in income to changes in investment. This is a real theory of the business cycle, which may be both the best and least understood part of Keynes’s work. Recessions arise, he said, “where investment is being made in conditions which are unstable and cannot endure, because it is prompted by expectations which are destined to disappointment.” Think of highly leveraged investments in Las Vegas condos a few years ago by those who thought they could resell at a higher price before the teaser rate on the mortgage went higher.

If such wrongheaded private investment collapsed, Keynes worried, fear could keep investment depressed for a long time. So he proposed offsetting the drop in private investment with government purchases. When it came to public works, the more wasteful the better-because unproductive investments would not crowd out private investment: “If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again . . . there need be no more unemployment.”

Such reasoning lay behind the infamous “multiplier,” which the late Harry Johnson described as an “inexhaustibly versatile mechanical toy.” Because people employed in burying and digging up bottles will supposedly employ other people by spending their paychecks, the initial increase in government spending was aside from transfer payments, the sources of income are payments for producing something consumers or taxpayers are willing to pay for. Saving generally involves spending too (buying stocks or bonds), with sellers receiving what the buyers spend. The fear-driven urge to keep savings piling up in cash (rather than stocks, bonds, or property) could become deflationary. But that is why the Fed has been meeting that surge in the demand for money with additional supply, while also making it unrewarding for
potential investors to just sit on T-bills.

Today’s business press is full of Keynesian stories about the “paradox of thrift” – fretting about consumers’ saving more and therefore buying less. Yet it’s quite possible for both savings and consumption to rise at the same time if income or wealth rises. And incomes and wealth will rise if conditions become more favorable for producers, including workers. Lower inflation, for example, was already raising households’ real disposable income by October and November of 2008.

I sometimes joke about having had trouble with Keynesian accounting in school-because I always wanted to subtract G. It’s not just a joke. Government purchases of real resources absorb labor, land, equipment, and materials, and thereby raise the cost thought to have a multiple effect on total spending. And that, said Keynes, will lead to an “increase in employment and hence in real income.” But checks received for producing nothing are not real income. Real income per worker depends on real output per worker-incentives to produce, not incentives to spend.

If there is no multiplier effect, the multiplier is one–a billion dollars of government spending adds a billion to national income, but no more. Keynes offered a hypothetical example suggesting the multiplier could be ten if people promptly spent 90 percent of added income on consumer goods. That is how he came to imagine that “public works even of doubtful utility may pay for themselves over and over again at a time of severe unemployment if only from the diminished cost of relief expenditure.”

Recent research finds multipliers to be very small at best, if not negative. In 2002, the IMF published “The Effectiveness of Fiscal Policy in Stimulating Economic Activity-a Review of the Literature” by Richard Hemming, Michael Kell, and Selma Mahfouz. They found that “short-term multipliers average around a half for taxes and one for spending, with only modest variation across countries and models.”

The C+I+G rubric is a tautology-true by definition. Yet it seduces people into confusing the uses of income (spending) with the sources of income (production). One person’s spending is another person’s income, but that does not mean the mere act of spending money creates real income. If that were true, then every poor country could become rich by simply dropping money from helicopters.
of production for private businesses, damaging the profitability of private investment. Government transfer payments are a disincentive for those who receive the benefits and for the taxpayers who pay.

Alberto Alesina of Harvard published a major long-term study of fiscal policy changes in 18 economies in The American Economic Review, September 2002. What they found was that “fiscal stabilizations that have led to an increase in growth consist mainly of spending cuts, particularly in government wages and transfers, while those associated with a downturn in the economy are characterized by tax increases.” Ireland experienced miraculous economic growth after cutting spending by an amount equal to 7 percent of GDP (the equivalent of the United States’ eliminating two Pentagons’ worth of spending) in the late 1980s, then slashing marginal tax rates on profits and capital gains. As an IMF report explained, Ireland also “significantly reduced the exceptionally progressive nature of the progressive tax structure and increased work incentives.” By contrast, Japan ran budget deficits that averaged 5.8 percent of GDP from 1993 to 2005, and the economy was stagnant. In 1997, Christina Romer, Obama’s choice to head the Council of Economic Advisers, found that a U.S. tax increase amounting to one percent of GDP reduces real GDP by nearly 3 percent within three years, with employment falling 1.1 percent and housing and business investment by 12.6 percent. Explaining the persistence of the damage from tax increases, she suggests “tax changes could have large supply-side effects.”

Theory that can explain everything explains nothing. If Keynesian theorists refuse to accept any
evidence as contradicting their theory, they are practicing a secular theology, not science.

Confronted with such inconvenient facts, Keynesians spin a different theory. When the economy recovers (as it always does), they say that is because budget deficits stimulate demand. If the economy later slumps, they’re likely to say that it is because budget deficits crowd out investment. If the dollar goes up, some Keynesians are sure to argue that budget deficits attract foreign investment. If the dollar goes down, they’ll say it’s because budget deficits create fears of inflation. If inflation goes up, that will be considered proof that budget deficits are inflationary. If inflation goes down, that just proves budget deficits are not large enough. The answer is always the same; only the questions change.

A theory that can explain everything explains nothing. If Keynesian theorists refuse to accept any evidence as contradicting their theory, they are practicing a secular theology, not science. A dozen years of massive public-works spending in Japan were associated with the weakest economic performance of any major economy of the time. Yet Paul Krugman now speculates that “even in Japan . . . public spending probably prevented a weak economy from plunging into an actual depression.” That leaves Keynesians with no testable hypothesis. They predicted that more G in Japan would produce much more Y, through the magic of multipliers. Whenever their predictions fail, Keynesians insist their theory is correct but reality has gone awry.

WHEN the government spends money, or gives it away in rebate checks, that undoubtedly “stimulates” those who receive the cash. But it has the opposite effect on those who pay the bills. Karl Marx, in his 1852 critique of Louis Bonaparte, explained that “the people are to be given employment: initiation of public works. But the public works increase the people’s tax obligations… Taxes are the life source of the bureaucracy. . . . Strong government and heavy taxes are identical.”

When the government borrows from Peter to pay Paul, taxpayers then have an obligation either to pay interest to Peter (forever) or to repay the debt. Government money does not become free money simply because it was borrowed. True, the U.S. government has been able to borrow at extremely low interest rates lately, but that never lasts for long. The extra debt the new administration plans to dump on the backs of future taxpayers will have to be rolled over at higher interest rates, sooner or later (more likely sooner) and the rising cost of debt service will be borne by tax-payers unless the government defaults (which is already the subject of some speculation).

The CBO estimates that the 2009 budget deficit will be S1.2 trillion, or 8.3 percent of GDP. Obama’s “recovery and reinvestment” plan is expected to increase the deficit by $825 billion over two years. Assuming that sum is split evenly between 2009 and 2010, it would raise the estimated deficit to 11.3 percent of GDP this year and 7.6 percent in the following year. And that’s not counting another $350 billion for the TARP slush fund.

A deficit of 11.3 percent of GDP would be nearly twice the previous peacetime record of 6 percent, set in 1983. Japan’s deficit was nearly as high in 1998, however, reaching 10.7 percent of GDP. Did that jump-start Japan’s economy? No, it did not.

The Obama team must not believe their lavish spending plans will do anything useful. They have claimed that spending an extra $825 billion over two years will add or save 3 million jobs. Those had better be terrific jobs, because the cost to taxpayers amounts to $275,000 per job. Why spend so much for so little? Deep recessions are invariably followed by strong recoveries, without gargantuan federal spending schemes. In fact, a 1999 study by Christina Romer showed that the average length of recessions from 1887 to 1929 was 10.3 months-without any Keynesian spending schemes-while the average recession from 1948 to 2000 lasted 10.7 months.

After the 1975 recession, employment grew by 6.2 million jobs in two years and 10.2 million in three. After the 1981-82 recession, employment grew by 5.5 million jobs in two years and 10.1 million in three. The population was much smaller in the past, making Obama’s target of 3 or 4 million jobs appear even less ambitious.

Before rushing to add another trillion dollars in TARP and stimulus spending to a deficit already above a trillion, is it too much to ask for some shred of evidence that “fiscal stimulus” ever worked?

Paul Krugman offers only one dubious success story. He says, “The Great Depression in the United States was brought to an end by a massive deficit-financed public works program, known as World War II.” But in “What Ended the Great Depression?” Christina Romer found that “monetary developments were very important and fiscal policy was of little consequence…. Even in 1942, the year that the economy returned to its trend path, the effects of fiscal policy were small.” Sending most young men overseas to fight certainly reduced the unemployment rate, but wartime price controls and rationing exaggerated measures of real income during the war.

What about post-war fiscal policy? Alan Auerbach of the University of California at Berkeley surveyed that topic in 2002, concluding that there is “little evidence these effects [of fiscal policy] have provided a significant contribution to economic stabilization, if in fact they have worked in the right direction at all.”

Andrew Mountford of the University of London and Harald Uhlig of the University of Chicago have a new statistical study of the U.S. fiscal experience, “What Are the Effects of Fiscal Policy Shocks?” (It can be found at nber.org.) They compare their results with several of the latest studies, including one co-authored by Romer: As with Blanchard and Perotti (2002) we find that investment falls in response to both tax increases and government spending increases and that the multipliers associated with changes in taxes [are] much higher than those associated with a change in spending. This latter result also accords with the analysis of Romer and Romer (2007) who find large effects from exogenous tax changes…. Our results… are thus more in line with those of Burnside, Eichenbaum and Fisher (2003) who find that private consumption does not change significantly in response to a positive [government] spending shock… . The responses of investment, consumption and real wages to a government spending shock are difficult to reconcile with the standard Keynesian approach.

The wonderful Christmas movie Miracle on 34th Street appeared a year after Keynes died. In that film Maureen O’Hara says, “Faith is believing in things when common sense tells you not to.” To persist in believing today, in innocent defiance of 60 years of experience and data, that Keynes devised a simple, safe, and reliable way to prevent or cure recessions requires that sort of blind faith. Given
the Left’s antipathy toward faith-based initiatives, it’s hard to imagine how Keynesian ideas endure.”

Mr. Reynolds is a senior Fellow of the Cato Institute and the author of Income and Wealth. Faith-Based ECONOMICS, A Keynes’ Comeback? by Alan Reynolds, NATIONAL REVIEW, FEBRUARY 9, 2009

 

HOW U.S. ECONOMISTS MISSED THE GREAT RECESSION

How U.S. Economists Missed The Great Recession

Economists, for the most part, failed to foresee the current financial and economic crisis-the worst since the 1930s. Now they cannot reach a consensus on how to resolve it. A few-such as Nouriel Roubini and Robert Schiller-saw what was coming but were ignored. James Galbraith, an economist at the University of Texas, said: “It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.” When Judge Richard Posner, a leading theorist of law and economics, was asked why the warnings about a looming crisis were ignored rather than investigated, he responded, “Many economists and political leaders are heavily invested in a free market ideology which teaches that markets are robust and self-regulating.” A reasonable question might be: Why listen to economists?

How Economics Works

Economics is a lot like theology, despite the former’s claim to be a science. Theology uses self-evident first principles from revelation or natural law and then, through the use of intermediate principles and judgments, evaluates real world issues. Economics uses an abstract model constructed from similarly axiomatic assumptions about how the world works, such as the principles that people are motivated by self-interest, that wants exceed resources or that resources are mobile and fungible. From these principles, economists then develop economic policies, with appropriate regard for real world exceptions to their models.

The problem for both theologians and economists lies in going from the general to the specific. I cannot speak for theologians, but economists are seldom trained in the specifics of how the real world works. Instead, a graduate student in economics spends all of his or her time learning mathematics, statistics and general theory. These tools are then used to develop policy by finding a data set somewhere and applying the given tools to yield an answer. Economic theory says, for example, that interpersonal wage differences are
the result of different amounts of human capital embodied in workers.

Yet how is human capital to be measured? Since no such actual thing exists, a proxy for human capital has to be used, a measurable datum, like years of schooling for a worker. Yet the result of this method is that the theory being tested is rendered self-fulfilling. If a statistical test appears to falsify the theory being tested, the test is rejected and the economist tries different proxies until the test comes out the way he or she expects. The data will be massaged and the test redone until the results “prove” the theory. Why?
Because economists believe the tenets of microeconomic theory the way theologians believe the core tenets of their faith.

Becoming an Economist

How do people become economists? David Colander writes in his delightful book, The Making of an Economist, Redux:

Were an undergraduate student to ask an economist how to become an economist, he would tell her to go to graduate school. She might demur, asking, “Wouldn’t it make more sense to go to Wall Street and learn how markets work?” Getting firsthand experience may sound like a good idea to her, but most economists would briskly dismiss the suggestion. “Well, maybe I should get a job in a real business – say, turning out automobiles.” The answer will be “no” again: “That’s not how you learn economics.” She might try one more time. “Well, how about if I read all the top economists of the past-John Stuart Mill, David Ricardo, Adam Smith?” Most economists would say, “It wouldn’t hurt, but it probably won’t help.” Instead, he would most likely tell her, “To become an economist who is considered an economist by other economists, you have to go to graduate school in economics.” So the reality is that, to economists, an economist is someone who has a graduate degree (doctorates strongly preferred) in economics. This means that what defines an economist is what he or she learns in graduate school.
Over the past 30 years or so the graduate economics curriculum has become more and more like a program in applied mathematics with a corresponding de-emphasis of economic history, history of economic thought, industry studies and industrial relations. This narrowing of focus gets reinforced as the student finishes the Ph.D. and gets a job in the academy. The greatest rewards go to those who make advances in theory and publish in the half dozen top academic journals. Few articles will be accepted by these journals that do not
start with the standard abstract model and then derive some new “interesting” result. Publishing in public policy journals, by contrast, is considered much less prestigious and can even count against an aspiring academic by showing that one is not a serious economist. And of course, after receiving tenure this is what one knows how to do.

Laissez-faire Meets Keynes

The microeconomic model that forms the core of economic theory is a beautiful mathematical construct. Based on the assumptions of self-interested economic actors, perfect mobility of resources, perfect competition, no externalities and so on, the model yields a Pareto optimal outcome – that is, one in which no one can be made better off without making someone else worse off. Since economists rule out interpersonal comparisons of utility, there is nothing more to be said. The result is that economists learn to believe that
this is the way the world works, and students drawn to study economics are frequently those who already believe this. In addition, behavioral economics research indicates that as undergraduate students study economics, they themselves demonstrate ever more self-interested behaviors. Until the mid-1930s, most economists believed a “free-market” economy would solve whatever problems arose. If goods and services and inputs into production were bought and sold in markets, they believed, the economy would function optimally. The result was a hands-off policy of laissez-faire economics; government would not interfere with the market.

With the breakdown of the economy in the 1930s, however, laissez-faire economics seemed discredited. In its place came the activist policies of Keynesian economics, which dominated until the stagflation of the late 1970s. One of the cornerstones of Keynes’s thought was his theory of investment. He argued forcefully that investment decisions were closely linked with what he called “animal spirits,” the emotional affect that governs human behavior. The term suggested fragility and instability in markets, even when the term was, in
large measure, narrowed to refer to profit expectations or business optimism.

Keynes had ample evidence for his theory in the Great Depression, for even though investment was sorely needed then and the interest rates had fallen below 1 percent, there was still minimal investment. No sane businessperson would invest, regardless of the interest rate, if he or she was convinced that the project would incur losses in the future. Thus the psychological basis of profit expectations makes economics more of an art than a science. In addition, Keynes rejected the neoclassical notion that wage reductions would restore full employment by leading employers to hire more workers because of lower costs. Instead, he argued that wages were more than simply a cost of production, but formed a part of aggregate demand. If wages fall, he argued, aggregate demand for goods and services and sales will fall. If sales fall, profits will decline and firms will require fewer workers. The experience of the Great Depression seemed convincing to all who were not wedded to classical or neoclassical economics. A small band of economists, however, never accepted the Keynesian notion that government could play an important role in stabilizing the economy or that markets were not self-regulating. Almost from the beginning there were efforts to reinterpret Keynes to make his
macroeconomics compatible with neoclassical microeconomics. Eventually this work produced the idea of “micro-foundations,” the method in which any macroeconomics was built on individual behavior that was rational and informed. In this theory of rational expectations, in which the economic actors have perfect knowledge, they act in such a way that any governmental policy will not work unless it is a complete surprise. Thus Keynesian policy is seen as ineffective at best and most probably harmful.

This revised version of laissez-faire economics reigned in the 1980s after the election of Ronald Reagan. At the heart of the theory is a belief that markets are self-correcting. Financial economists developed this into the “efficient market hypothesis,” which argued that markets quickly and correctly incorporate all publicly available information into prices. Under the strong version of this theory, the only reason prices of assets like stocks change is that new information becomes available; thus financial markets could not
consistently mis-price assets and therefore needed little regulation.

Between their narrow technical training and their bias toward free markets, most economists failed to see the coming perfect storm of economic recession and financial crisis. In fact they paved the way for it by urging the deregulation of financial markets, which in turn allowed the creation of all kinds of dubious new debt instruments, wildly increasing the leverage of bank capital, and even allowing huge Ponzi schemes to go undetected. When the extremely low interest rates set by the Federal Reserve were added to this, the “bubble”
created in the housing industry was a natural outcome, and the spread to the financial sector was catastrophic.

Admitting Failure?

The most astonishing admission of failure of the free market model was that of former Federal Reserve chairman Alan Greenspan in Autumn 2008, when he admitted that the Fed’s monetary management regime had been based on a “flaw.” The “whole intellectual edifice,” he said, “collapsed in the summer of last year.”
Robert Schiller, an economist at Yale, thinks the failure to foresee the financial collapse is the result of fearing to deviate from the consensus of the profession. And he does not think that economists have learned the lesson: “The rational expectations models will be tweaked to account for the current crisis. The basic curriculum will not change.” Dani Rodrick, an economist at Harvard University said, referring to the free-market model, “We have fixated on one of the possible hundreds of models and elevated that above the others.” John Kay, a financial columnist for The Financial Times, wrote: Max Planck, the physicist, said he had eschewed economics because it was too difficult. Planck, Keynes observed, could have mastered the corpus of mathematical economics in a few days–it might now have taken him a few weeks. Keynes went on to explain that economic understanding required an amalgam of logic and intuition and a wide knowledge of facts, most of which are not precise: “a requirement overwhelmingly difficult for those whose gift mainly consists in the power to imagine and pursue to their furthest points the implications and prior conditions of comparatively simple facts which are known with a high degree of precision.” On this, as on much else, Keynes was right.

Encouraging Signs

I must not end without saying some positive things about economics and economists. There is much new work, even though still seldom included in the core curriculum, that is exciting and holds out varying degrees of hope for a regeneration of economics. Behavioral economics, evolutionary economics, happiness economics, economics of social capital and social norms, and the economics of asymmetric information all hold out hope of breaking through the twin constraints of methodological formalism and competitive equilibrium. Also, behavioral finance theory should provide a sounder basis than does the efficient-market hypothesis for future analyses of financial markets.

Even more encouraging is a growing recognition that economies require ethical behavior in addition to self-interest. Modern economics has selectively adopted Adam Smith’s metaphor of the invisible hand, focusing on the economically wondrous effects of the butcher and baker trading out of their self-interest and ignoring Smith’s prior description of the same deistic hand’s propelling the creation of a virtuous society. Virtue serves as “the fine polish to the wheels of society,” while vice is “like the vile rust, which makes them jar and grate upon one another.” As Jerry Evensky, an economist at Syracuse University, argues for Smith “ethics is the hero-not self-interest or greed-for it is ethics that defends the social intercourse from the Hobbesian chaos.” Indeed, Smith sought to distance his thesis from the notion that individual greed could be the basis for social good. His understanding that virtue is a prerequisite for a desirable market society remains an important lesson.”
 
ON THE WEB Charles K. Wilber answers readers’ questions. americamagazine.org/qa

CHARLES K. WILBER is emeritus professor of economics and a fellow at the Kroc Institute for International Peace Studies at the University of Notre Dame in Indiana.
America Magazine, September 28, 2009


 

THE PRICE OF RELIGIOUS FREEDOM

THE PRICE OF RELIGIOUS FREEDOM

Rights protected on a case-by-case basis soon are not protected at all.

“In his engaging new biography, “Johnny Appleseed: the Man, the Myth, the American Story,” journalist Howard Means scrubs away nearly two centuries of rumor and myth to uncover the truth about 19th-century pioneer nurseryman John Chapman, a national folk hero whom most of us know only from Disney cartoons and children’s books, Means’ meticulous research reveals Chapman as an ascetic, conservationist and pacifist well-suited to serve as patron saint of today’s faith-based “creation care” movement, it also exposes Chapman as a bona fide religious eccentric. The itinerant preacher traveled alone and barefoot across
the frontier proclaiming a peculiar twist, on Christianity known as swedenborgianism, based on the writings of Swedish scientist and self-proclaimed divine visionary Emanuel Swedenborg.

Swedenborgianism never got much traction as American religious movements go. Its founder’s refutation of Christian orthodoxy and claims to have seen heaven and hell down to the last detail -the angels’ celestial homes have “gardens, flowerbeds, and lawns” just like ours, Swedenborg said – proved too dubious to attract a mainstream following. Yet Chapman remained a devoted disciple to the end, inspired by Swedenborg’s writings to live a life as unconventional as the theology he preached.

Chapman was an unusual religious character, to be sure, but as Means notes in his book, unusual religious characters were ubiquitous on the American frontier. Although we tend to view our nation’s early years through the rose-tinted lens of “Little House on the Prairie” reruns, real early American life – and the real religious scene during America’s formative years – was anything but orderly and orthodox. As Means notes, “a whole new horizon of possibilities was forming for religious seekers” during Chapman’s day, including mysticism, pantheism and universalism. Utopian movements flourished, Armageddon seemed just around
the corner. Religious groups splintered at alarming rates, and zealous preachers armed with little more than a Bible and a tent jostled each other for the title of leading frontier revivalist.

Means’ description of this wild-and-woolly 19th-century religious scene makes today’s American religious marketplace sound positively tame. And it offers some historical context for the troubling ease of Terry Jones, the loose-cannon pastor in Gainesville, Fla., whose Quran -burning stunt recently sparked deadly riots overseas and much hand-wringing stateside about the dangers of religious freedom.

Commenting recently on Jones’ provocations – the pastor’s next plan is to put Mohammed “on trial” and to lead an anti-Islam protest outside America’s largest mosque – Republican Sen. Lindsey Graham of South Carolina said, “Free speech is a great idea, but we’re in a war. During World War II, you had limits on what you could do if it inspired the enemy.”

Actually, our freedoms of speech and religion are more than great ideas. They are bedrock principles upon which this nation was founded, the very principles for which we purportedly are fighting overseas. And they apply in times of war as well as times of peace – the former of which is looking much more like America’s normative condition these days than the latter.

Inflammatory and irresponsible as Jones’ antics are – and embarrassing as they are to mainstream Christians who know that desecrating another religion’s holy book is an exceptionally ineffective means of evangelization, to put it mildly – they fall squarely within the realm of constitutionally protected speech. In America, being an outspoken, offensive religious nut is not illegal – at least, not yet.

Muslims have a right to be angry about Jones’ offensive actions. But no one has the right to murder over such acts. If we affirm that truth in principle, yet call for the muzzling of people such as Jones in practice, we prove that America’s defense of free speech and religious freedom is just a ruse. And we open the door to exactly the sort of religious oppression we condemn in Muslim theocracies, an oppression no less dangerous because it begins with the apparently benign goal of banishing intolerance. The messy, sometimes ugly reality of religious freedom gave us the incendiary Terry Jones. It also gave us the pacifist Johnny
Apple-seed, not to mention the heroic Martin Luther King Jr. And it has given millions of Americans, from our nation’s rough-and-rugged frontier days to our own, the liberty to adopt and express religious beliefs that others consider silly, dangerous or downright vile. That’s a freedom not recognized or protected by our enemies. We should not capitulate to them by forfeiting it, even in the hard cases.”

Colleen Carroll Campbell is a St. Louis-based author, former presidential speech writer and television and radio HOST of “Faith & Culture” on EWTN. Her website is www.colleen-campbell.com. This POINT OF VIEW COLUMN appeared in the St. Louis Post Dispatch – Thursday, April 7, 2011

MISLEADING INDICATORS, The Miseducation of Economists,

by Charles Wilber

How U.S. Economists Missed The Great Recession
Economists, for the most part, failed to foresee the current financial and economic crisis-the worst since the 1930s. Now they cannot reach a consensus on how to resolve it. A few-such as Nouriel Roubini and Robert Schiller-saw what was coming but were ignored. James Galbraith, an economist at the University of Texas, said: “It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.” When Judge Richard Posner, a leading theorist of law and economics, was asked why the warnings about a looming crisis were ignored rather than investigated, he responded, “Many economists and political leaders are heavily invested in a free market ideology which teaches that markets are robust and self-regulating.” A reasonable question might be: Why listen to economists?
How Economics Works
Economics is a lot like theology, despite the former’s claim to be a science. Theology uses self-evident first principles from revelation or natural law and then, through the use of intermediate principles and judgments, evaluates real world issues. Economics uses an abstract model constructed from similarly axiomatic assumptions about how the world works, such as the principles that people are motivated by self-interest, that wants exceed resources or that resources are mobile and fungible. From these principles, economists then develop economic policies, with appropriate regard for real world exceptions to their models.
The problem for both theologians and economists lies in going from the general to the specific. I cannot speak for theologians, but economists are seldom trained in the specifics of how the real world works. Instead, a graduate student in economics spends all of his or her time learning mathematics, statistics and general theory. These tools are then used to develop policy by finding a data set somewhere and applying the given tools to yield an answer. Economic theory says, for example, that interpersonal wage differences are the result of different amounts of human capital embodied in workers.
Yet how is human capital to be measured? Since no such actual thing exists, a proxy for human capital has to be used, a measurable datum, like years of schooling for a worker. Yet the result of this method is that the theory being tested is rendered self-fulfilling. If a statistical test appears to falsify the theory being tested, the test is rejected and the economist tries different proxies until the test comes out the way he or she expects. The data will be massaged and the test redone until the results “prove” the theory. Why? Because economists believe the tenets of microeconomic theory the way theologians believe the core tenets of their faith.
Becoming an Economist
How do people become economists? David Colander writes in his delightful book, The Making of an Economist, Redux:
Were an undergraduate student to ask an economist how to become an economist, he would tell her to go to graduate school. She might demur, asking, “Wouldn’t it make more sense to go to Wall Street and learn how markets work?” Getting firsthand expe-rience may sound like a good idea to her, but most economists would briskly dismiss the suggestion. “Well, maybe I should get a job in a real business– say, turning out automobiles.” The answer will be “no” again: “That’s not how you learn economics.” She might try one more time. “Well, how about if I read all the top economists of the past-John Stuart Mill, David Ricardo, Adam Smith?” Most economists would say, “It wouldn’t hurt, but it probably won’t help.” Instead, he would most likely tell her, “To become an economist who is considered an economist by other economists, you have to go to graduate school in economics.” So the reality is that, to economists, an economist is someone who has a graduate degree (doctorates strongly preferred) in economics. This means that what defines an economist is what he or she learns in graduate school. Over the past 30 years or so the graduate economics curriculum has become more and more like a program in applied mathematics with a corresponding de-emphasis of economic history, history of economic thought, industry studies and industrial relations. This narrowing of focus gets reinforced as the student finishes the Ph.D. and gets a job in the academy. The greatest rewards go to those who make advances in theory and publish in the half dozen top academic journals. Few articles will be accepted by these journals that do not start with the standard abstract model and then derive some new “interesting” result. Publishing in public policy journals, by contrast, is considered much less prestigious and can even count against an aspiring academic by showing that one is not a serious economist. And of course, after receiving tenure this is what one knows how to do.
Laissez-faire Meets Keynes
The microeconomic model that forms the core of economic theory is a beautiful mathematical construct. Based on the assumptions of self-interested economic actors, perfect mobility of resources, perfect competition, no externalities and so on, the model yields a Pareto optimal outcome- that is, one in which no one can be made better off without making someone else worse off. Since economists rule out interpersonal comparisons of utility, there is nothing more to be said. The result is that economists learn to believe that this is the way the world works, and students drawn to study economics are frequently those who already believe this. In addition, behavioral economics research indicates that as undergraduate students study economics, they themselves demonstrate ever more self-interested behavior.
Until the mid-1930s, most economists believed a “free-market” economy would solve whatever problems arose. If goods and services and inputs into production were bought and sold in markets, they believed, the economy would function optimally. The result was a hands-off policy of laissez-faire economics; government would not interfere with the market.
With the breakdown of the economy in the 1930s, however, laissez-faire economics seemed discredited. In its place came the activist policies of Keynesian economics, which dominated until the stagflation of the late 1970s. One of the cornerstones of Keynes’s thought was his theory of investment. He argued forcefully that investment decisions were closely linked with what he called “animal spirits,” the emotional affect that governs human behavior. The term suggested fragility and instability in markets, even when the term was, in large measure, narrowed to refer to profit expectations or business optimism.
Keynes had ample evidence for his theory in the Great Depression, for even though investment was sorely needed then and the interest rates had fallen below 1 percent, there was still minimal investment. No sane businessperson would invest, regardless of the interest rate, if he or she was convinced that the project would incur losses in the future. Thus the psychological basis of profit expectations makes economics more of an art than a science.
In addition, Keynes rejected the neoclassical notion that wage reductions would restore full employment by leading employers to hire more workers because of lower costs. Instead, he argued that wages were more than simply a cost of production, but formed a part of aggregate demand. If wages fall, he argued, aggregate demand for goods and services and sales will fall. If sales fall, profits will decline and firms will require fewer workers. The experience of the Great Depression seemed convincing to all who were not wedded to classical or neoclassical economics.
A small band of economists, however, never accepted the Keynesian notion that government could play an important role in stabilizing the economy or that markets were not self-regulating. Almost from the beginning there were efforts to reinterpret Keynes to make his macroeconomics compatible with neoclassical microeconomics. Eventually this work pro-duced the idea of “microfoundations,” the method in which any macroeconomics was built on individual behavior that was rational and informed. In this theory of rational expectations, in which the economic actors have perfect knowledge, they act in such a way that any governmental policy will not work unless it is a complete surprise. Thus Keynesian policy is seen as ineffective at best and most probably harmful.
This revised version of laissez-faire economics reigned in the 1980s after the election of Ronald Reagan. At the heart of the theory is a belief that markets are self-correcting. Financial economists developed this into the “efficient market hypothesis,” which argued that markets quickly and correctly incorporate all publicly available information into prices. Under the strong version of this theory, the only reason prices of assets like stocks change is that new information becomes available; thus financial markets could not consistently mis-price assets and therefore needed little regulation.
Between their narrow technical training and their bias toward free markets, most economists failed to see the coming perfect storm of economic recession and financial crisis. In fact they paved the way for it by urging the deregulation of financial markets, which in turn allowed the creation of all kinds of dubious new debt instruments, wildly increasing the leverage of bank capital, and even allowing huge Ponzi schemes to go undetected. When the extremely low interest rates set by the Federal Reserve were added to this, the “bubble” created in the housing industry was a natural outcome, and the spread to the financial sector was catastrophic.
Admitting Failure?
The most astonishing admission of failure of the free market model was that of former Federal Reserve chairman Alan Greenspan in autumn 2008, when he admitted that the Fed’s monetary management regime had been based on a “flaw.” The “whole intellectual edifice,” he said, “collapsed in the summer of last year.”
Robert Schiller, an economist at Yale, thinks the failure to foresee the financial collapse is the result of fearing to deviate from the consensus of the profession. And he does not think that economists have learned the lesson: “The rational expectations models will be tweaked to account for the current crisis. The basic curriculum will not change.” Dani Rodrick, an economist at Harvard University said, referring to the free-market model, “We have fixated on one of the possible hundreds of models and elevated that above the others.” John Kay, a financial columnist for The Financial Times, wrote: Max Planck, the physicist, said he had eschewed economics because it was too difficult. Planck, Keynes observed, could have mastered the corpus of mathematical economics in a few days–it might now have taken him a few weeks. Keynes went on to explain that economic understanding required an amalgam of logic and intuition and a wide knowledge of facts, most of which are not precise: “a requirement overwhelmingly difficult for those whose gift mainly consists in the power to imagine and pursue to their furthest points the implications and prior conditions of comparatively simple facts which are known with a high degree of precision.” On this, as on much else, Keynes was right.
Encouraging Signs
I must not end without saying some positive things about economics and economists. There is much new work, even though still seldom included in the core curriculum, that is exciting and holds out varying degrees of hope for a regeneration of economics. Behavioral economics, evolutionary economics, happiness economics, economics of social capital and social norms, and the economics of asymmetric information all hold out hope of breaking through the twin constraints of methodological formalism and competitive equilibrium. Also, behavioral finance theory should provide a sounder basis than does the efficient-market hypothesis for future analyses of financial markets.
Even more encouraging is a growing recognition that economies require ethical behavior in addition to self-interest. Modern economics has selectively adopted Adam Smith’s metaphor of the invisible hand, focusing on the economically wondrous effects of the butcher and baker trading out of their self-interest and ignoring Smith’s prior description of the same deistic hand’s propelling the creation of a virtuous society. Virtue serves as “the fine polish to the wheels of society,” while vice is “like the vile rust, which makes them jar and grate upon one another.” As Jerry Evensky, an economist at Syracuse University, argues for Smith “ethics is the hero-not self-interest or greed-for it is ethics that defends the social intercourse from the Hobbesian chaos.” Indeed, Smith sought to distance his thesis from the notion that individual greed could be the basis for social good. His understanding that virtue is a prerequisite for a desirable market society remains an important lesson.

CHARLES K. WILBER is emeritus professor of economics and a fellow at the Kroc Institute for International Peace Studies at the University of Notre Dame in Indiana.  America Magazine, September 28, 2009

ON THE WEB Charles K. Wilber answers readers’ questions. americamagazine.org/qa

“WHOEVER LOSES HIS LIFE WILL SAVE IT”

“Blessed are those who die in the Lord,” and at the very time grace has touched them and converted them to God. They will not accumulate the faults and errors which lie in wait on life’s road for those who have received the rude shock of conversion, those to whom is suddenly given the superhuman precept to live “as not living.” Was it not to the first Christians, all of whom were converts, that Saint Paul said: “Know ye not, that as many of us as were baptized unto Christ Jesus, we were baptized unto his death? We were buried therefore with him through this baptism unto death…”
Every Christian is essentially a “separated” being, separated from the world by the shroud of Christ’s death; but for the convert, it is by a sudden blow – which tears apart his bonds with himself and with others – that he is separated from the world! In one instant, at the hour of grace, all values have been moved about for him. And he becomes a strange being in the eyes of his neighbor whom he loves or tries to love “as himself” – but who does not love or understand him, and looks with a surprise not unmixed with distrust upon this bizarre inhabitant of a city infinitely removed from the roads known to this world. The world is without shame because it is animal but the Christian must bend his efforts to becoming a spiritual man. The world respects greatness of quantity and strength, the spiritual man must glorify God through humility and poverty.
Eternity has descended upon a soul devoted until then to passing time; it has struck it like lightning. The divine storm has laid waste our disorder, and charity has only begun to order within us our different loves.
The intention of the convert from then on hangs suspended to the immutable and eternal truth, perceived within the faith, and the convert must now put to rights all the objects in a house made topsy-turvy by the invasion of grace.      RAISSA MARITAIN.                                             Raissa Maritain (+1960) was born in Russia. She was a convert to Catholicism and the wife of philosopher Jacques Maritain,                     Magnificat Meditation on the Feast of Frances Xavier Cabrini, November 13, 2009

THE SEX ABUSE CRISIS and THE CULTURE OF THE CHURCH

By Archbishop Coleridge
In a letter for Pentecost, Archbishop Mark Coleridge of Canberra and Goulburn, Australia, said that among other factors, the church’s “culture of forgiveness, which tends to view things in terms of sin and forgiveness rather than crime and punishment” played a role in the clerical sex abuse crisis. In the May 23 letter, Archbishop Coleridge said he has come to believe that a complex combination of some aspects of the church’s culture played a role in the crisis. Archbishop Coleridge discussed these factors that “may have combined to make the problem cultural rather than merely personal”: “a poor understanding and communication of the church´s teaching on sexuality, shown particularly in a rigorist attitude to the body and sexuality” celibacy, while not a factor in itself, may have been attractive to men who had pedophile tendencies; seminary training lacking in human formation that led to “institutionalized immaturity”; clericalism understood as a hierarchy of power rather than service; triumphalism in the image of the church; prioritizing discretion; and the underestimation of the power and subtlety of evil. He said some of these factors must be abandoned, including a rigorist notion of the body and sexuality, gaps in seminary training and the types of clericalism they can produce, triumphalism and the underestimation of evil. He said celibacy must be purified and that there must be a greater awareness that the church´s culture of forgiveness and discretion “can turn dark.” The archbishop’s letter follows:

It has taken a tragically long time for other Australians to begin to see the faces and hear the voices of indigenous people. For too long indigenous Australians were simply unseen and unheard; and that was the way the rest of us seemed to want it. Their land was terra nullius; they were not citizens.
Now that indigenous people are visible and audible, we others are not sure what exactly to do about their suffering, but at least we can see them and hear them – and even say sorry.
The same is true, I now think, of the survivors of sexual abuse in the Catholic Church and elsewhere. For too long they were unseen and unheard. To see their faces and hear their voices has taken people like me a tragically long time. But at least now we can see their faces and hear their voices, even if we have no quick fix for the devastation we see and hear.
The story of sexual abuse of the young within the Catholic Church has been the greatest drama of my 36 years in the priesthood. So let me tell my own story of growing awareness of the reality; the story is mine but I suspect it is not unlike the story of many.
I speak in retrospect but with no illusions about the present or the future. I cannot say that abuse of the young is not still happening in the church nor that it will not happen in the future. What I can say is that the bitter lessons of the past have made it more likely that I and the church will deal sensitively with abuse and its aftermath now and in the future.
The first case I heard of was in the 1970s when I was a young priest in Melbourne. When the news broke, I thought it was weird and distressing. I had hardly heard the word pedophilia in my early life and seminary training; I knew what it meant, but I would have struggled to spell it.
If I thought of pedophilia at all in the church, I would have found it mind-boggling that a priest, to whom the young are entrusted in a special way, could abuse children. But there it was undeniably, and I thought it was a tragic and isolated episode.
But then more cases came to light through the 1980s and 1990s. Some of these were all the more troubling because among the abusers were priests who seemed well-functioning human beings and good pastors. By the mid-’90s, I was serving as spokesman for the church in Melbourne, so I had to try to know the facts, understand them and speak about them in public.
At that stage I could not accept that this abuse was somehow cultural, by which I mean that it was more than merely personal, that it was the product of a “system.” I insisted that it was a matter of personal, not communal or institutional culpability, that it did not represent something systemic in the culture of the Catholic Church. Individual clergy and religious had not only sinned grievously but had also committed crimes, and they needed to answer for it personally before God and the law. That much seemed clear to me.
It was at this time that I had my first meetings with survivors of sexual abuse as individuals and in groups. These meetings showed me the extraordinary damage done to many of them by the abuse they had suffered. This was something that I had not encountered or understood previously, and I was deeply shocked.

“We owe the Irish an immense debt of gratitude for what they have given us, but for complex historical reasons the church in Ireland was prey to the rigorist influence that passed from the continent to Ireland… and found fertile soil there. It then passed into the Irish diaspora.”

I was taken aback at times by the force of their anger, which was of a kind I had rarely if ever encountered, and it was something in the face of which I felt at times powerless to respond. I could see that these were people in need of all the care and compassion we could offer and that any response that did not have them as its prime concern was bound to fail – at least if the Gospel was the measure of success and failure.
I could also see, and have come to see more clearly since, that those abused can be overlooked, even hidden. The challenge for me was to see their faces and to hear their voices, and that was not easy.
Through the 1990s, I came to realize that, just as we had failed to understand the effects of the abuse, so too we had not understood the nature of the pathology or the scale of the problem. We have learned a great deal on both counts in recent years, though there is still much to be learned as things continue to unfold; but at least now our learning is set on a firmer base.
One thing we have learned is just how compulsive the pathology can be. At first I thought that most incidents of sexual abuse were one-off incidents, and that can be true at times. But I now know that most pedophile abuse is serial. I was aghast to read transcripts of the trials of pedophile clergy; it seemed that their lives revolved around the grooming and abuse of children.
It was apparent that this kind of abuse was something other than a moral lapse, a fall into sin, which could be made good by appropriate repentance, penance and a fresh start. During this period, it was becoming clear to me that genuine rehabilitation of the pedophile was a very uncertain prospect, though the clinical experts were not and are not of one mind on this. Whatever about their professional disagreement, the sense that there was no place for the pedophile in the priesthood was growing stronger in me.
Another aspect of the pathology that I came to see was its hiddenness. This was abetted by a general ignorance in the community, but pedophile clergy were extraordinarily adept at concealing their abuse of the young. I have known priests who lived with some of the worst offenders, and it has been presumed at times that they must have known what was going on and turned a blind eye. But my sense is that those living with pedophile clergy knew nothing of the abuse that was going on and were horrified when it came to light. So too there were clergy who were known to have around the presbytery children – usually boys – but nobody I knew imagined that some of them were molesting the children, as it turned out they had been.
It is also true that offenders were often incapable of recognizing the grave harm they had done. The wrongdoing, indeed the crime, was hidden even from them. Yet they themselves were highly visible in the life of the church, especially in the life of bishops.
The institutional invisibility of the abused was a major reason why, initially at least, there was so much attention given to offending clergy and so little to their victims, who were unseen and unheard by comparison.
A further thing I learned was the complexity of the field of criminal sexual offense, which lies at the intersection of medicine, law and social morality – not to mention, in the case of Catholic clergy, the church’s moral teaching and the discipline of celibacy. For example, I learned the difference between pedophilia and ephebophilia. The word pedophilia may have been strange to me, but the word ephebophilia was totally unknown. Where pedophilia refers to the sexual attraction to per-pubescent children, ephebophilia refers to the sexual attraction to post-pubescent adolescents. A good deal of what was coming to light in the years of my growing awareness was not pedophilia but ephebophilia.
In general, it seems to me now that the church and society have not understood well enough the implications of complexity in this area: Again, we know more than we did, but there is still a lot of learning to be done.

“The authority proper to the ordained could become authoritarian, and the hunger for intimacy proper to human beings could become predatory.”

It was only as more and more cases came to light that I began to understand the scale of the problem. It is true that the number of offenders is a small percentage of the Catholic clergy and that the percentage is about the same as in the wider community. But viewed from another angle, where even a single offense is appalling, it was an incomprehensible number, with the figure made worse because of the exceptional trust placed in Catholic clergy. That is a trust which has produced wonderful fruit in both priests and people, but it was the same trust which enabled the abuse to happen and made it all the worse.
No one now can deny the scale of the problem, and the urgent task is to go further along the path of understanding and action in a way that is deeply sensitive to the harm done to those who have been abused and determined to do everything possible to root out the evil from the church.
One question that came to trouble me more, especially when I was working in the Vatican from 1997 to 2002, was whether or not the problem was cultural in the church. The question was unavoidable as through those years I followed closely the drama of the U.S. church in its attempt to come to grips with the crisis and the way in which the Holy See sought to help, as it did in the unprecedented meeting of the U.S. cardinals with Pope John Paul II early in 2002.
I came to think that the problem was in some way cultural, but that prompted the further question of how: what was it that allowed this canker to grow in the body of the Catholic Church, not just here and there but more broadly? I would part company with some answers to this question because they seem to me ill-informed, one-dimensional or ideologically driven. There is no one factor that makes abuse of the young by Catholic clergy in some sense cultural. It seems to me rather a complex combination of factors which I do not claim to understand fully, even if I now understand more than I did.
I should also say that the combination is not the same from culture to culture or from one era to another. Pedophilia – or the sexual abuse of children – is a universal phenomenon, but it is configured differently from culture to culture and from one historical period to another. So too the factors that have made it cultural within the Catholic Church at this time are configured differently from one place to another, even if there is in some sense a Catholic culture which takes root in different human cultures. But this should not be overstated.
Here I mention briefly several factors which in my view may have combined to make the problem cultural rather than merely personal, at least in the Australian situation. My reflection at this point is very much a work in progress, and I make no claim that this list is complete or even correct.
—One factor was a poor understanding and communication of the church’s teaching on sexuality, shown particularly in a rigorist attitude to the body and sexuality. This was mediated in part through the formative influence of Irish Catholicism in the life of the church in Australia.
We owe the Irish an immense debt of gratitude for what they have given us, but for complex historical reasons the church in Ireland was prey to the rigorist influence that passed from the continent to Ireland – often under the name of Jansenism – and found fertile soil there. It then passed into the Irish diaspora, of which Australia was part.
This rigorist influence led to an implicit denial of the Incarnation, which had people thinking they had to deny their humanity to find their way to the divinity. The irony of this is that the Incarnation stands at the very heart of the Catholic sense of a sacramental universe. Jansenism grew from Catholic soil, though it was tinged with Calvinism too. But there was nothing incarnational about Jansenism, and the Catholic Church rejected it, even if its influence has been hard to erase, with traces remaining still.
Catholic teaching on sexuality offers deep insights and rich resources which we will need to explore in new ways as we seek to deal with the current crisis.
– Clerical celibacy was not in itself a factor, but – like any form of the Christian life lived seriously – it has its perils. When clerical celibacy works well, it is a unique source of spiritual and pastoral fruitfulness in the church; when it works badly it can be very damaging all round. It becomes especially risky when sundered from the ascetical and mystical life which it presumes: This is a large challenge, especially perhaps for secular clergy in the bustle of their daily lives.

“It is hard to believe that the church´s response
would have been so poor had lay people been involved
from the start in shaping a response.”

The discipline of celibacy may also have been attractive to men in whom there were pedophile tendencies which may not have been explicitly recognized by the men themselves when they entered the seminary.
–A further factor was certain forms of seminary training which failed to take proper account of human formation and promoted therefore a kind of institutionalized immaturity. Seminaries were not always seen as schools of discipleship, since faith was taken for granted in a way that looks seriously questionable now.
Seminary formation was not tied to a vision of lifelong formation, so that a man once ordained was thought to have completed all the formation he would need for his priestly ministry through life. This was fateful, given that pedophile tendencies, usually latent at the time of seminary training, often emerged only after ordination.
– Clericalism understood as a hierarchy of power, not service, was also a factor. It was a fruit of seminary training that was inadequate at certain points, and it is almost inevitable once the priesthood and preparation for it are not deeply grounded in the life of faith and discipleship. Clergy could be isolated in ways that were bound to turn destructive. The authority proper to the ordained could become authoritarian, and the hunger for intimacy proper to human beings could become predatory.
It is hard to believe that the church’s response would have been so poor had lay people been involved from the start in shaping a response. In more recent years, lay men and women – not all of them Catholic – have been much involved in shaping the church’s response, and that is one reason why we are now doing better. The task belongs not just to the bishops and priests but to the whole church, with all working together in this fraught situation.
– A certain triumphalism in the Catholic Church, a kind of institutional pride, was a further factor. There is much in the Catholic Church, her culture and tradition, about which one can be justifiably proud, as one can be of her achievements in this country; and Easter is always a motive for triumph of the right kind. But there can be a dark side to this which leads to a determination to protect the reputation of the church at all costs.
Through the radical social and cultural changes of the 20th century, the Catholic Church was seen to have risen above the maelstrom of history and not to be afflicted in the way other churches and Christian communities were. At least in this country, our institutions in areas such as education, health and welfare were mighty contributions to society as a whole; and this gave the impression that we were a church that went from strength to strength. Others may suffer decline, but we did not. What mattered was to present well in public in order to affirm to ourselves and to others that we were “the great church.” Such hubris will always have its consequences.
– Another factor was the Catholic Church’s culture of forgiveness, which tends to view things in terms of sin and forgiveness rather than crime and punishment. But in the case of clerical abuse of the young, we are dealing with crime, and the church has struggled to find the point of convergence between sin and forgiveness on the one hand and crime and punishment on the other.
True, sin must be forgiven, but so too must crime be punished. Both mercy and justice must run their course and do so in a way that converges. This relates to larger questions of how the church sees her relationship with society more generally. We are “in the world but not of it”: But what precisely does that mean in the here and now?
There is also the large question of the relationship between divine and human judgment. The church insists that it is to God, not to human beings, that final judgment belongs. Yet how does that fit with the need for human judgment when we move within the logic of crime and punishment? We have been slow and clumsy, even at times culpable, in shaping our answer to such questions.
– Playing its part too was the culture of the Catholic Church insofar as it favors a certain discretion, which in the case of the sacrament of penance becomes an absolute confidentiality. The church has long spoken of the sins of calumny and detraction. The first refers to the spreading of false allegations against others; the second refers to the spreading of allegations which are true but defamatory. Both are sinful.

“I have wondered if the whole of society is somehow mysteriously and unconsciously complicit in the phenomenon of child abuse, but in the end it seems to me that the blame game in any of its forms cannot take us far along the path of healing, reconciliation and reform that lies before us.”

There are many things known to us about others – certainly known to clergy – but which charity forbids us to spread abroad. This is not always a matter of protecting the reputation of the church but of protecting the dignity of others in a way that charity commands. Yet this culture of discretion turned dark when it was used to conceal crime and to protect the reputation of the church or the image of the priesthood in a country that has never known the virulent anti-clericalism of elsewhere.
– The church may also have underestimated the power and subtlety of evil. This may seem strange to say of the church, which is often regarded as taking evil and sin more seriously than do other churches and Christian communities. But it is evil we are dealing with in the case of sexual abuse of the young; and it is an evil which is not just personal. It is a power which reaches beyond the individual; it seems more metaphysical than moral.
A supra-personal power seems to take hold of human beings who are not in themselves wholly evil. But they are in the grip of a power which they can, it seems, do little to understand or control; and it is a power which is hugely destructive in the lives of those they have abused and in their own lives.
None of these factors alone would have made the problem cultural in the church, but the combination may have done so. Clearly, some have to be abandoned – rigorist notions of the body and sexuality, gaps in seminary training and the kind of clericalism they can produce, triumphalism, the underestimation of evil. Others – like the living of celibacy in the priestly life – need to be purified rather than abandoned. Some – like the church’s culture of forgiveness and discretion – clearly need to be retained, though with a greater awareness of what they can encourage and how they can turn dark.
I am perplexed when I hear it said that the church – at least in this country – has done nothing about the problem. A great deal has been done by many people, but there is still a great deal to be done. I do not believe that the bishops are simply indulging in “damage control” and trying to “manage” the problem. That may have been true in the past, but I do not think it is true now.
There has been a growing awareness among them that the church’s approach has to be essentially pastoral, with its prime focus on the needs of those who have been abused. That is the thrust of the structures and protocols which have been put in place and are being continually refined as we learn more.
The attached document shows what has been done in this country and what is being done. What is clear is that there will be no quick fix to this problem, the roots of which go deep and wide. We are in for the long haul.
On that journey, there is a need for cool heads and compassionate hearts which resist apocalyptic scenarios and keep striving instead to understand the reality calmly and comprehensively, always attending primarily to the victims we have not seen and the voices we have not heard.
I have asked myself often enough who has been to blame in all this. Clearly the victims were not, though we have treated them at times as if they were. Just as clearly, the offenders were to blame and must bear the full weight of judgment, both human and divine. The bishops? Yes, insofar as they concealed or denied the abuse. The media? Not too often, although there have been appalling instances of trial-by-media with the presumption of innocence cast aside; some reporting has been jaundiced by sensationalism and anti-Catholicism, while other reporting has actually helped the church to see the faces and hear the voices. The lawyers? Only infrequently, even though there have been lawyers who have behaved in ways that have not only dishonored their profession but also treated victims in ways which themselves have been abusive.
At times I have wondered if the whole of society is somehow mysteriously and unconsciously complicit in the phenomenon of child abuse, but in the end it seems to me that the blame game in any of its forms cannot take us far along the path of healing, reconciliation and reform that lies before us.
All can see that this is a time of crisis for the Catholic Church, even though the nature of the crisis would be understood differently by different people within the church and outside. The word crisis comes from the Greek word krisis, which means judgment. The church is under judgment. That judgment is in part human, as many point the accusing finger at the Catholic Church and especially at her leaders. But also and more important, the judgment is divine.
The God who has called the church “out of darkness into his own wonderful light” (1 Pt 2:9) is acting now as he has done in the past, as the Bible attests: God stands in judgment upon us and calls us into an experience of lamentation that acknowledges sin and looks beyond the disaster that sin has caused to the new future God is preparing for the people he loves.
Paradoxically, this lamentation does not preclude the joy of Easter. We normally think that lamentation and joy are mutually exclusive, but now they have to find a home together in the one heart, the heart of the church, just as they dwell together in the heart of Jesus Christ. At the moment, the Catholic Church and the bishops in particular are being pounded mightily and dismissed as lacking all credibility or worse. This is hardly surprising, and it can be humiliating. But it is not the end of the world; nor is it the end of the church. Paradoxically, the Catholic Church has often been at her best when down for the count.
History shows that new and unexpected surges of Gospel energy have come not infrequently in the wake of devastation. My hope is that we may now be moving slowly and painfully toward a moment of that kind. That is surely the promise of Easter, which is what sustains me and many others through this troubled time. My deepest and most heartfelt prayer is that the same promise of life out of death will sustain the survivors of sexual abuse whose faces I have seen and will see, whose voices I have heard and will hear.”

“COMMENTARY”

In his letter, Bishop Marie Coleridge mentioned an attached document that detailed what the church in Australia has done and is doing to protect children. Following are excerpts: “Since the late 1980s, when the issues of abuse by church personnel became more widely known in Australia and overseas, the Australian Catholic bishops and the leaders of religious institutes have worked together to put in place procedures to address allegations of abuse….”
“Today the church reiterates the apology made when the revised protocol was published in 1996 as – Towards Healing–We acknowledge with deep sadness and regret that a number of clergy and religious and other church personnel have abused children, adolescents and adults who have been in their pastoral care. To these victims we again offer our sincere apology.
“The  Towards Healing principles and procedures have been independently reviewed in 2000 and 2009…. Submissions for the reviews came from a wide range of people….
“Involvement of Police”
“The church encourages those with a complaint of criminal abuse to go to the police and will assist them to do so. It realizes that for many reasons some victims choose not to do this. Nevertheless the church will take the complaint seriously and take such other steps as are necessary to ensure no person is at risk. “When the complaint concerns an alleged crime, the contact person or director of professional standards shall explain to the complainant that the church has a strong preference that the allegation be referred to the police so that the case can be dealt with appropriately through the justice system. If desired, the complainant will be assisted to do this. Where it applies, the contact person shall also explain the requirements of the law of mandatory reporting.” (TH, 37.1).
“When a complainant does go to police, the church still offers counseling and other assistance and advises the person that they may approach the church again when any criminal process is concluded (cf. TH, 37.2).
“Even where a complainant insists that he or she will not go to police, the church believes that it has an obligation to pass intelligence to police (not identifying the complainant) and is currently working on protocols and structures which will enable that to extend to all states and territories (TH, 37.4). “The church complies with all state/territory laws concerning mandatory reporting of abuse and concerning oversight of investigations…” (TH, 34.6, 37.5).
“Continuing in Ministry”
“If a matter proceeds outside of – Towards Healing, – the church still investigates whether there is any possible risk to children or the vulnerable if the accused were to remain in ministry (TH, 36.6).
“The church stands a person aside from any particular ministry or from all ministries, pending investigation, where there is risk of harm to others should the allegations prove to be true (TH, 38.10).” “The church adheres to best practice in deciding the response to those guilty of abuse. In particular, those who have abused children or young people are not given back the power they have abused.”
“If guilt has been admitted or proved, the response must be appropriate to the gravity of what has happened, while being consistent with the civil law or canon law which governs that person’s position. Account will be taken of how serious was the violation of the integrity of the pastoral relationship and whether there is a likelihood that such behavior could be repeated. Serious offenders in particular those who have been found responsible for sexually abusing a child or young person, or whose record of abuse of adult pastoral relationships indicates that they could well engage in further sexual exploitation of vulnerable adults, will not be given back the power they have abused. Those who have made the best response to treatment recognize this themselves and realize that they can no longer return to ministry” (TH, 27; cf. 42.3, 42.4, 42.5, 42.6).
“Being concerned to protect children and other vulnerable people into the future, the church has not always sought laicization for some older priests and religious but has put in place supervision and support structures while removing them from situations which might entail risk to others. While this may be more onerous than simply releasing such persons into the community, this is seen as contributing more to the safeguarding of the vulnerable.
“For claims of abuse which do not go to criminal law or civil law processes, the ‘Towards Healing – protocols provide a means by which the church can still respond to those who have been harmed by any of its personnel.”
“Contact persons help provide details of allegations and the effects on the person making them. Independent assessors investigate the allegations and make findings about them. In facilitated meetings church authorities meet victims and come to an understanding of the impact of abuse on them. Through hearing the experiences of victims, church authorities aim to provide assistance in dealing with victims’ present needs and assist in taking some steps toward healing”.
“Experienced facilitators have told professional standards personnel that bishops and leaders who have participated in meeting with victims in this way have themselves grown in understanding of the effects of abuse and in their own spirituality.”
“Prevention of Abuse”
“The church acts in accordance with good child protection practices in verifying the suitability of persons for employment or as volunteers.” “Church bodies… shall have in place procedures, consistent with good child protection and industrial relations practice, for verifying the suitability of persons for employment or for participation as volunteers. They shall obey all applicable laws concerning employment screening and the prohibition of certain convicted persons from employment involving children” (TH, 45.3). “The church has in place procedures to verify the suitability to minister of its clergy and religious who transfer between jurisdictions” (TH, 45.6,45.7).
“The church has in place documents which state the standards of behavior for its clergy, religious and lay personnel and… runs training programs for its personnel….” “The church continues to develop programs within parishes, schools and other church institutions, which assess risk to children and the vulnerable and seeks to put in place structures, procedures and behavior codes which will lead to safe environments.”
“The revised “Towards Healing” restates public criteria according to which the community may judge the resolve of church leaders to address issues of abuse within the church. If we do not follow the principles and procedures of this document, we will have failed according to our own criteria. (TH, Introduction).       -30-

THE PRICE OF RELIGIOUS FREEDOM

Rights protected on a case-by-case basis soon are not protected at all. “In his engaging new biography, “Johnny Appleseed: the Man, the Myth, the American Story,” journalist Howard Means scrubs away nearly two centuries of rumor and myth to uncover the truth about 19th-century pioneer nurseryman John Chapman, a national folk hero whom most of us know only from Disney cartoons and children’s books, Means’ meticulous research reveals Chapman as an ascetic, conservationist and pacifist well-suited to serve as patron saint of today’s faith-based “creation care” movement, it also exposes Chapman as a bona fide religious eccentric. The itinerant preacher traveled alone and barefoot across the frontier proclaiming a peculiar twist, on Christianity known as swedenborgianism, based on the writings of Swedish scientist and self-proclaimed divine visionary Emanuel Swedenborg.
Swedenborgianism never got much traction as American religious movements go. Its founder’s refutation of Christian orthodoxy and claims to have seen heaven and hell down to the last detail -the angels’ celestial homes have “gardens, flowerbeds, and lawns” just like ours, Swedenborg said – proved too dubious to attract a mainstream following. Yet Chapman remained a devoted disciple to the end, inspired by Swedenborg’s writings to live a life as unconventional as the theology he preached.
Chapman was an unusual religious character, to be sure, but as Means notes in his book, unusual religious characters were ubiquitous on the American frontier. Although we tend to view our nation’s early years through the rose-tinted lens of “Little House on the Prairie” reruns, real early American life – and the real religious scene during America’s formative years – was anything but orderly and orthodox. As Means notes, “a whole new horizon of possibilities was forming for religious seekers” during Chapman’s day, including mysticism, pantheism and universalism. Utopian movements flourished, Armageddon seemed just around the corner. Religious groups splintered at alarming rates, and zealous preachers armed with little more than a Bible and a tent jostled each other for the title of leading frontier revivalist.
Means’ description of this wild-and-woolly 19th-century religious scene makes today’s American religious marketplace sound positively tame. And it offers some historical context for the troubling ease of Terry Jones, the loose-cannon pastor in Gainesville, Fla., whose Quran-burning stunt recently sparked deadly riots overseas and much hand-wringing stateside about the dangers of religious freedom.
Commenting recently on Jones’ provocations – the pastor’s next plan is to put Mohammed “on trial” and to lead an anti-Islam protest outside America’s largest mosque – Republican Sen. Lindsey Graham of South Carolina said, “Free speech is a great idea, but we’re in a war. During World War II, you had limits on what you could do if it inspired the enemy.”
Actually, our freedoms of speech and religion are more than great ideas. They are bedrock principles upon which this nation was founded, the very principles for which we purportedly are fighting overseas. And they apply in times of war as well as times of peace – the former of which is looking much more like America’s normative condition these days than the latter.
Inflammatory and irresponsible as Jones’ antics are – and embarrassing as they are to mainstream Christians who know that desecrating another religion’s holy book is an exceptionally ineffective means of evangelization, to put it mildly – they fall squarely within the realm of constitutionally protected speech. In America, being an outspoken, offensive religious nut is not illegal – at least, not yet.
Muslims have a right to be angry about Jones’ offensive actions. But no one has the right to murder over such acts. If we affirm that truth in principle, yet call for the muzzling of people such as Jones in practice, we prove that America’s defense of free speech and religious freedom is just a ruse. And we open the door to exactly the sort of religious oppression we condemn in Muslim theocracies, an oppression no less dangerous because it begins with the apparently benign goal of banishing intolerance. The messy, sometimes ugly reality of religious freedom gave us the incendiary Terry Jones. It also gave us the pacifist Johnny Apple-seed, not to mention the heroic Martin Luther King Jr. And it has given millions of Americans, from our nation’s rough-and-rugged frontier days to our own, the liberty to adopt and express religious beliefs that others consider silly, dangerous or downright vile. That’s a freedom not recognized or protected by our enemies. We should not capitulate to them by forfeiting it, even in the hard cases.
Colleen Carroll Campbell is a St. Louis-based author, former presidential speech writer and television and radio HOST of “Faith & Culture” on EWTN. Her website is www.colleen-campbell.com. This POINT OF VIEW COLUMN appeared in the St. Louis Post Dispatch – Thursday, April 7, 2011

FAITH-BASED ECONOMICS, A Keynes’ Comeback?

By Alan Reynolds
Keynes makes a comeback, but his ideas are still wrong.  A recent Wall Street Journal article describes “the new old big thing” in economic policy: “Around the world . . . policy makers are invoking the ideas of British economist John Maynard Keynes … who argued that governments should fight the Great Depression in the 1930s with heavy spending.” In the New York Times Magazine, Robert Skidelsky appoints Keynes “”man of the year.”” Robert Reich, labor secretary under President Clinton, praises the “rebirth of Keynes.” Long before Keynes published The General Theory of Employment, Interest and Money in 1936, he was a highly persuasive and witty writer on economic issues, often appearing in London newspapers and talking on the radio. But that was very long ago, and Keynes died in 1946. Economics has since become less reliant on armchair theorizing and more deeply grounded in statistical fact.
Using quaint Keynesian arguments to rationalize heavy spending is nothing new. But its resurgent popularity is somewhat surprising. Democrats and their favorite economists spent the past 25 years bemoaning the “twin deficits” of the 1980s and then claimed that the strong economy of the late 1990s was the result of President Clinton’s fiscal restraint-the precise opposite of “fiscal stimulus.” Also working in the anti-Keynesian mode, former treasury secretary Robert Rubin co-authored a 2004 paper with forecaster Allen Sinai and Peter Orzsag of the Brookings Institution, who now has been tapped by Obama to lead the Office of Management and Budget. They argued that “budget deficits decrease national saving, which reduces domestic investment and increases borrowing abroad.” Big budget deficits, warned Rubin, Orzsag, and Sinai, would “reduce future national income” and risk a “decline in confidence [which] can reduce stock prices.”
Democrats´ anxieties about future deficits had abated only slightly by January 2008, when the incoming head of the Congressional Budget Office, Douglas Elmendorf, co-authored a Brookings paper with Jason Furman, nominated deputy director of Obama’s National Economic Council. They strongly favored monetary stimulus over fiscal stimulus, and they warned that “it is critical that efforts to fight a recession do not end up increasing the long-run budget deficit and thus harming long-run growth.” Elmendorf and Furman rightly noted that “the idea that Congress should make legislative changes to tax or spending policies in order to counter the business cycle has fallen into disfavor among economists.”
In November 2000, for example, Skidelsky wrote in The Economist that “what survives today of Keynesian economics is … Keynes’s intuition that… the source of instability lies in the logic of financial markets.” In other words, not much. Skidelsky noted that “monetary policy has supplanted fiscal policy as a short-term stabilizer.” And he concluded that deep experience with governments´ “capacity for error and folly suggests that discretionary policy should be used very sparingly.”
Many of the economists who repeatedly prophesied in ominous fashion about the dangers of relatively trivial deficit spending during the Reagan and Bush years have inexplicably become enthusiastic supporters of deficits likely to exceed 10 percent of GDP during the Obama administration. If asked about this remarkable political agility, they would probably say their change of heart comes because (1) some forecasters now say this recession is going to be extremely long and deep, and (2) the Fed doubled the monetary base (bank reserves and currency) from September to December, but that action did not produce instant recovery.
John Kenneth Galbraith had advice for the first point: “Never base policy on a forecast.” As recently as August, some prominent forecasters were warning of runaway inflation and urging the Fed to tighten. Forecasters failed to predict the financial crisis in September and today have no idea how long or how deep the recession will be. They’re making guesses.
On the second point, the lagging effects of monetary policy can take some time to become apparent. The U.S. economy does not turn on a dime. Some are arguing that what the Fed is doing will be both ineffective and inflationary, which is contradictory. My advice: Never underestimate the Fed.
Keynes was not quite as skeptical of the efficacy of monetary policy as many of his followers have become. He wrote that the effect of increasing the quantity of money is “not nugatory,” and that “the terms on which the monetary authority will change the quantity of money enters as a real determinant into the economic scheme.” But by the 1960s, Keynes’s apostles were minimizing the role of monetary policy and exaggerating the apparently magical properties of government borrowing. Inflation was considered a useful lubricant in the machinery of full employment. In the late 1960s and 1970s, rising inflation was routinely described by a thermal metaphor (“overheating”), and regarded as a social problem to be endlessly fought with fiscal policy (a surtax) and with income policy (wage/price controls), but never with monetary policy.
Milton Friedman’s 1967 address to the American Economic Association described how Keynesian theorizing had come to underestimate the power of the Federal Reserve: Keynes offered simultaneously an explanation for the presumed impotence of monetary policy to stem the Depression, a non-monetary interpretation of the Depression, and an alternative to monetary policy for meeting the Depression, and his offering was avidly accepted… . The wide acceptance of these views in the economics profession meant that for some two decades monetary policy was believed by all but a few reactionary souls to have been rendered obsolete by new economic knowledge. Money did not matter. Its only role was the minor one of keeping interest rates low, in order to hold down interest payments in the government budget, contribute to the “euthanasia of the rentier,” and maybe stimulate investment a bit to assist government spending in maintaining a high level of aggregate demand.
Unlike Keynes´s 1930 Treatise on Money, his General Theory offered no coherent theory of inflation or the price level but instead treated nominal and real income as the same thing. He suggested that “an increase in the quantity of money will have no effect whatever on prices, so long as there is any unemployment.” That idea was later formalized in the Phillips Curve tradeoff, whereby lower unemployment could supposedly be achieved through higher inflation. The results of that policy bias were the disastrous inflationary recessions of 1974-75 and 1980-82.
In 1978, future Nobel laureate Robert Lucas Jr. wrote an obituary for these ideas, “After Keynesian Economics,” along with Thomas Sargent of the University of Minnesota. They showed that “Keynesian… predictions were wildly incorrect and that the doctrine on which they were based is fundamentally flawed.” The hubris of expert demand-management through fiscal policy should have suffered a permanent loss of credibility 30 years ago. But memory is short.
ONE reason Keynesian theorizing never quite disappears is that our national-income model deliberately incorporates Keynesian concepts. Keynes described the overall economy in terms of how money is spent rather than how it is earned. He divided national income into a few arbitrary accounting categories, describing income (denoted by the letter “Y”) as being spent for consumption (“C”), investment (“I”), government (“G”), and net imports (“X”). Ignoring foreign trade, as Keynes usually did, this yields the famous equation: Y=C+I+G “The decisions to consume and the decisions to invest,” he wrote, “between them determine incomes.” The theory remains much too popular – because it is much too simple. Keynes’s discussion of consumption makes no distinction between durable and non-durable goods, and regards consumption as dependent on current income alone, not wealth. Yet young people clearly consume out of human capital (expected future income) and seniors consume out of accumulated financial capital.
How many times have we read the demand-side fallacy – namely, that economic growth “depends on” consumption, because consumption accounts for 70 percent of GDP? To say that income growth depends on consumption would be absurdly circular even in Keynesian terms, because Keynes argues that consumption depends on income. In reality, Keynes attributed sudden gyrations in income to changes in investment. This is a real theory of the business cycle, which may be both the best and least understood part of Keynes’s work. Recessions arise, he said, “where investment is being made in conditions which are unstable and cannot endure, because it is prompted by expectations which are destined to disappointment.” Think of highly leveraged investments in Las Vegas condos a few years ago by those who thought they could resell at a higher price before the teaser rate on the mortgage went higher.
If such wrongheaded private investment collapsed, Keynes worried, fear could keep investment depressed for a long time. So he proposed offsetting the drop in private investment with government purchases. When it came to public works, the more wasteful the better-because unproductive investments would not crowd out private investment: “If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again . . . there need be no more unemployment.”
Such reasoning lay behind the infamous “multiplier,” which the late Harry Johnson described as an “inexhaustibly versatile mechanical toy.” Because people employed in burying and digging up bottles will supposedly employ other people by spending their paychecks, the initial increase in government spending was aside from transfer payments, the sources of income are payments for producing something consumers or taxpayers are willing to pay for. Saving generally involves spending too (buying stocks or bonds), with sellers receiving what the buyers spend. The fear-driven urge to keep savings piling up in cash (rather than stocks, bonds, or property) could become deflationary. But that is why the Fed has been meeting that surge in the demand for money with additional supply, while also making it unrewarding for potential investors to just sit on T-bills.
Today’s business press is full of Keynesian stories about the “paradox of thrift” – fretting about consumers’ saving more and therefore buying less. Yet it’s quite possible for both savings and consumption to rise at the same time if income or wealth rises. And incomes and wealth will rise if conditions become more favorable for producers, including workers. Lower inflation, for example, was already raising households’ real disposable income by October and November of 2008.
I sometimes joke about having had trouble with Keynesian accounting in school-because I always wanted to subtract G. It’s not just a joke. Government purchases of real resources absorb labor, land, equipment, and materials, and thereby raise the cost thought to have a multiple effect on total spending. And that, said Keynes, will lead to an “increase in employment and hence in real income.” But checks received for producing nothing are not real income. Real income per worker depends on real output per worker-incentives to produce, not incentives to spend.
If there is no multiplier effect, the multiplier is one – a billion dollars of government spending adds a billion to national income, but no more. Keynes offered a hypothetical example suggesting the multiplier could be ten if people promptly spent 90 percent of added income on consumer goods. That is how he came to imagine that “public works even of doubtful utility may pay for themselves over and over again at a time of severe unemployment if only from the diminished cost of relief expenditure.”
Recent research finds multipliers to be very small at best, if not negative. In 2002, the IMF published “The Effectiveness of Fiscal Policy in Stimulating Economic Activity-a Review of the Literature” by Richard Hemming, Michael Kell, and Selma Mahfouz. They found that “short-term multipliers average around a half for taxes and one for spending, with only modest variation across countries and models.”
The C+I+G rubric is a tautology-true by definition. Yet it seduces people into confusing the uses of income (spending) with the sources of income (production). One person’s spending is another person’s income, but that does not mean the mere act of spending money creates real income. If that were true, then every poor country could become rich by simply dropping money from helicopters.
of production for private businesses, damaging the profitability of private investment. Government transfer payments are a disincentive for those who receive the benefits and for the taxpayers who pay.
Alberto Alesina of Harvard published a major long-term study of fiscal policy changes in 18 economies in The American Economic Review, September 2002. What they found was that “fiscal stabilizations that have led to an increase in growth consist mainly of spending cuts, particularly in government wages and transfers, while those associated with a downturn in the economy are characterized by tax increases.” Ireland experienced miraculous economic growth after cutting spending by an amount equal to 7 percent of GDP (the equivalent of the United States’ eliminating two Pentagons’ worth of spending) in the late 1980s, then slashing marginal tax rates on profits and capital gains. As an IMF report explained, Ireland also “significantly reduced the exceptionally progressive nature of the progressive tax structure and increased work incentives.” By contrast, Japan ran budget deficits that averaged 5.8 percent of GDP from 1993 to 2005, and the economy was stagnant. In 1997, Christina Romer, Obama’s choice to head the Council of Economic Advisers, found that a U.S. tax increase amounting to one percent of GDP reduces real GDP by nearly 3 percent within three years, with employment falling 1.1 percent and housing and business investment by 12.6 percent. Explaining the persistence of the damage from tax increases, she suggests “tax changes could have large supply-side effects.”  A theory that can explain everything explains nothing. If Keynesian theorists refuse to accept any evidence as contradicting their theory, they are practicing a secular theology, not science. Confronted with such inconvenient facts, Keynesians spin a different theory. When the economy recovers (as it always does), they say that is because budget deficits stimulate demand. If the economy later slumps, they’re likely to say that it is because budget deficits crowd out investment. If the dollar goes up, some Keynesians are sure to argue that budget deficits attract foreign investment. If the dollar goes down, they’ll say it’s because budget deficits create fears of inflation. If inflation goes up, that will be considered proof that budget deficits are inflationary. If inflation goes down, that just proves budget deficits are not large enough. The answer is always the same; only the questions change.
A theory that can explain everything explains nothing. If Keynesian theorists refuse to accept any evidence as contradicting their theory, they are practicing a secular theology, not science. A dozen years of massive public-works spending in Japan were associated with the weakest economic performance of any major economy of the time. Yet Paul Krugman now speculates that “even in Japan . . . public spending probably prevented a weak economy from plunging into an actual depression.” That leaves Keynesians with no testable hypothesis. They predicted that more G in Japan would produce much more Y, through the magic of multipliers. Whenever their predictions fail, Keynesians insist their theory is correct but reality has gone awry.
WHEN the government spends money, or gives it away in rebate checks, that undoubtedly “stimulates” those who receive the cash. But it has the opposite effect on those who pay the bills. Karl Marx, in his 1852 critique of Louis Bonaparte, explained that “the people are to be given employment: initiation of public works. But the public works increase the people’s tax obligations… Taxes are the life source of the bureaucracy. . . . Strong government and heavy taxes are identical.”
When the government borrows from Peter to pay Paul, taxpayers then have an obligation either to pay interest to Peter (forever) or to repay the debt. Government money does not become free money simply because it was borrowed. True, the U.S. government has been able to borrow at extremely low interest rates lately, but that never lasts for long. The extra debt the new administration plans to dump on the backs of future taxpayers will have to be rolled over at higher interest rates, sooner or later (more likely sooner) and the rising cost of debt service will be borne by tax-payers unless the government defaults (which is already the subject of some speculation).
The CBO estimates that the 2009 budget deficit will be S1.2 trillion, or 8.3 percent of GDP. Obama’s “recovery and reinvestment” plan is expected to increase the deficit by $825 billion over two years. Assuming that sum is split evenly between 2009 and 2010, it would raise the estimated deficit to 11.3 percent of GDP this year and 7.6 percent in the following year. And that’s not counting another $350 billion for the TARP slush fund.
A deficit of 11.3 percent of GDP would be nearly twice the previous peacetime record of 6 percent, set in 1983. Japan’s deficit was nearly as high in 1998, however, reaching 10.7 percent of GDP. Did that jump-start Japan’s economy? No, it did not.
The Obama team must not believe their lavish spending plans will do anything useful. They have claimed that spending an extra $825 billion over two years will add or save 3 million jobs. Those had better be terrific jobs, because the cost to taxpayers amounts to $275,000 per job. Why spend so much for so little? Deep recessions are invariably followed by strong recoveries, without gargantuan federal spending schemes. In fact, a 1999 study by Christina Romer showed that the average length of recessions from 1887 to 1929 was 10.3 months-without any Keynesian spending schemes-while the average recession from 1948 to 2000 lasted 10.7 months.
After the 1975 recession, employment grew by 6.2 million jobs in two years and 10.2 million in three. After the 1981-82 recession, employment grew by 5.5 million jobs in two years and 10.1 million in three. The population was much smaller in the past, making Obama’s target of 3 or 4 million jobs appear even less ambitious.
Before rushing to add another trillion dollars in TARP and stimulus spending to a deficit already above a trillion, is it too much to ask for some shred of evidence that “fiscal stimulus” ever worked?
Paul Krugman offers only one dubious success story. He says, “The Great Depression in the United States was brought to an end by a massive deficit-financed public works program, known as World War II.” But in “What Ended the Great Depression?” Christina Romer found that “monetary developments were very important and fiscal policy was of little consequence…. Even in 1942, the year that the economy returned to its trend path, the effects of fiscal policy were small.” Sending most young men overseas to fight certainly reduced the unemployment rate, but wartime price controls and rationing exaggerated measures of real income during the war.
What about post-war fiscal policy? Alan Auerbach of the University of California at Berkeley surveyed that topic in 2002, concluding that there is “little evidence these effects [of fiscal policy] have provided a significant contribution to economic stabilization, if in fact they have worked in the right direction at all.”
Andrew Mountford of the University of London and Harald Uhlig of the University of Chicago have a new statistical study of the U.S. fiscal experience, “What Are the Effects of Fiscal Policy Shocks?” (It can be found at nber.org.) They compare their results with several of the latest studies, including one co-authored by Romer: As with Blanchard and Perotti (2002) we find that investment falls in response to both tax increases and government spending increases and that the multipliers associated with changes in taxes [are] much higher than those associated with a change in spending. This latter result also accords with the analysis of Romer and Romer (2007) who find large effects from exogenous tax changes…. Our results… are thus more in line with those of Burnside, Eichenbaum and Fisher (2003) who find that private consumption does not change significantly in response to a positive [government] spending shock… . The responses of investment, consumption and real wages to a government spending shock are difficult to reconcile with the standard Keynesian approach.
The wonderful Christmas movie Miracle on 34th Street appeared a year after Keynes died. In that film Maureen O’Hara says, “Faith is believing in things when common sense tells you not to.” To persist in believing today, in innocent defiance of 60 years of experience and data, that Keynes devised a simple, safe, and reliable way to prevent or cure recessions requires that sort of blind faith. Given the Left’s antipathy toward faith-based initiatives, it’s hard to imagine how Keynesian ideas endure.

Mr. Reynolds is a senior Fellow of the Cato Institute and the author of Income and Wealth. Faith-Based ECONOMICS, A Keynes’ Comeback? by Alan Reynolds, NATIONAL REVIEW, FEBRUARY 9, 2009

THE SHOCK OF CONVERSION

Magnificat Meditation on the Feast of Frances Xavier Cabrini, November 13, 2009

“Blessed are those who die in the Lord,” and at the very time grace has touched them and converted them to God. They will not accumulate the faults and errors which lie in wait on life’s road for those who have received the rude shock of conversion, those to whom is suddenly given the superhuman precept to live “as not living.” Was it not to the first Christians, all of whom were converts, that Saint Paul said: “Know ye not, that as many of us as were baptized unto Christ Jesus, we were baptized unto his death? We were buried therefore with him through this baptism unto death…”
Every Christian is essentially a “separated” being, separated from the world by the shroud of Christ’s death; but for the convert, it is by a sudden blow – which tears apart his bonds with himself and with others – that he is separated from the world! In one instant, at the hour of grace, all values have been moved about for him. And he becomes a strange being in the eyes of his neighbor whom he loves or tries to love “as himself” – but who does not love or understand him, and looks with a surprise not unmixed with distrust upon this bizarre inhabitant of a city infinitely removed from the roads known to this world. The world is without shame because it is animal but the Christian must bend his efforts to becoming a spiritual man. The world respects greatness of quantity and strength, the spiritual man must glorify God through humility and poverty.
Eternity has descended upon a soul devoted until then to passing time; it has struck it like lightning. The divine storm has laid waste our disorder, and charity has only begun to order within us our different loves.
The intention of the convert from then on hangs suspended to the immutable and eternal truth, perceived within the faith, and the convert must now put to rights all the objects in a house made topsy-turvy by the invasion of grace.   RAISSA MARITAIN.                            –Raissa Maritain (+1960) was born in Russia. She was a convert to Catholicism and the wife of philosopher Jacques Maritain,                                    Magnificat Meditation, 11(13)2009