Say What? Issue More Debt to Relieve a Debt Crisis? Only in Wonderland!

The name of this blog came from a commentary I wrote for Forbes nearly three years ago, but I would add that the writers and editors of the New York Times seem to be living in their own Wonderland. This is a newspaper that took the confabulated “evidence” in the Duke Lacrosse Case and insisted that it all made sense when people living in the Reality World saw it and wondered how in the heck a D.A. managed to find a rape case wrapped up on that nonsense.

Unfortunately, the delusion that is the NYT is not limited to imaginary crimes being committed by “young men of privilege.” No, the NYT still is insisting that we can and should “spend our way” out of this financial crisis. In today’s editorial, we see yet another plea for central banks and governments to unleash another round of debt in order to enable sinking governments to…repay debt.

(Remember that the NYT was all over Karl Rove for his “reality-based world” comments when he was the de facto political officer for the Bush administration. While I agreed with the editors’ assessment of Rove’s comments then, I only can conclude that Rove Disease has overtaken the NYT editorial offices.)

The editorial is insisting that governments don’t cut back on borrowing and spending (and increasing taxes) because if they stop borrowing, then won’t be able to repay their debts:

Excessive indebtedness is a real, long-term problem. But Europe’s broad downward trajectory can only be turned around if governments — both those of lenders and debtors — spend more in the near term to put people back to work and get consumers back to spending.

The proper interpretation of those words is as follows: “We need to stop drinking, but in the interim, another round for the house! Let us make a toast to ending toasts…in the future!”

This is not, of course, what the editors actually seem to believe. Like Hitler’s generals in the Berlin bunker who were insisting to the bitter end that they could win World War II, the editors are insisting that another round of borrowing and spending (and more taxation) THIS time will take hold and that economic growth will be just around the corner:

As the crisis quickens, more enlightened voices struggle to be heard. Christine Lagarde, the new managing director of the International Monetary Fund, is calling for balancing long-term debt reduction with “short-term support for growth and jobs.” The financier George Soros this week renewed his pleas for more growth-friendly policies, as has Gordon Brown, the former British prime minister.

What do the editors mean by “growth-friendly policies”? They mean more borrowing, more government spending, more subsidies, higher marginal tax rates, higher fuel taxes, more regulation, destruction of industries such as energy industries that still are profitable, more criminal penalties for normal business transactions, and broader welfare policies.

Yes, I am sure that all of these things will enable the economies of the USA and Europe to grow. Increase burdens upon individuals and businesses, make it easier to throw people into prison, print money, increase government borrowing, increase anti-business rhetoric, and expand the police powers of the state, and out of this is going to come that unicorn known as “economic growth.” Create a little boom now and we will figure later how to deal with the inevitable bust.

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