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June 10, 2011
Fact-Checking Limbaugh's Seminar Caller
On Thursday, a victim of the Reid-Pelosi recession -- an out-of-work lawyer -- phoned Rush Limbaugh's conservative radio show, suggesting a revival of Depression-era Keynesian spending. Here is the transcript. On the fly, Mr. Limbaugh responded quite well to the caller's claims, which also are fact-checked below.
Sensing that it was a "seminar caller", Limbaugh adroitly refused to accept the caller's premises. (After the call, the host explained that Clinton aide Dick Morris produced seminars many years ago, training Democrats to get on conservative shows and parrot Democrat talking points) The caller then floundered around, suggesting more government spending, but eventually got frustrated and implied that Limbaugh is a substance abuser. Even if that were true, it's not clear how Limbaugh's drug use might clinch the caller's argument for more failed Keynesian spending.
In case other unemployed Democrats have begun calling conservative radio shows with 1930s leftist clichés, here are a few facts for hosts to keep in mind:
Claim 1: Overall tax collection of the federal government today is lower than it was under President Reagan. (The caller implied that more taxation leads to prosperity)
Facts: There's no evidence that taxation causes prosperity, but it seems plausible that there still could be a backward correlation, since federal tax is proportional to economic activity, and activity was much stronger under Mr. Reagan. However, the caller's claim is false. According to Mr. Obama's own OMB, current federal tax adds up to a little over $2T annually, and tax receipts during the 1980s averaged about a third of that. Reagan's average tax of about $700B in 1984 would be $1.5T in today's dollars, still much less than what Mr. Obama is collecting.
Claim 2: One-third of Obama's stimulus package was tax cuts. (The caller implied that tax cuts cause recessions -- or at least they don't cure recessions)
Facts: True, in theory. The so-called "tax cuts" included a one-time $116B payroll tax credit, plus a number of other tax credits that only partially were used. Unfortunately, such one-time payments can't stimulate an economy when inflation expectations are low, as they were in 2009. Without corresponding spending cuts, taxpayers realize that they'll just have to give the $400 back (with interest) to the government sometime in the future to cover its additional $400 per-capita debt, so they save, rather than invest it.
In theory, such artificial "sugar highs" can work without spending cuts when taxpayers expect high inflation. Under those conditions, dollars become "hot potatoes" and get spent immediately. Yes, taxpayers realize they eventually will have to repay the borrowed government debt, but they figure they'll be able to repay it later with inflated salaries and currency.
Did Mr. Obama's tax cuts make the recession worse? No. They just moved money from one pocket to the other, so they had zero impact either way. Consumers simply saved the money or used it to pay down existing debt.
Claim 3: The government has to do something to create jobs. (The caller implied that additional government infrastructure spending would add to, rather than simply displace, private investment)
Facts: True and false. In theory, government infrastructure investment can produce an excellent return. However, because it's one of the few forms of government spending that actually holds the promise of a net benefit for society, it has attracted political and bureaucratic parasites. For instance, as I wrote last November, California's 75-year-old Bay Bridge originally cost only $1.2B in today's dollars. Now, it will cost over $6.3B to replace just a third of it. Government infrastructure spending became a honey pot for labor unions, affirmative action hustlers, eco-fascists, overpaid bureaucrats, and crooks. (Is "crooks" redundant?)
The fundamental flaw in government spending is that its productivity is so low compared to private sector investment. In the 1990s, economist Martin Feldstein calculated the true cost of government spending to be more than twice the amount spent. In other words, a dollar of government spending costs society more than two dollars. Since then, government employee compensation has risen even more relative to private sector compensation, so its relative productivity has gotten worse.
Claim 3a: Mountaintops that have been lopped off to get coal need remediation. Electrical grid, student loans, blah, blah, blah...
Facts: False. Yes, some busybody movie stars want to spend taxpayer money (not their own, of course) to rebuild mountains, but one has to wonder whether society would be better or worse off after such efforts. Obviously, for reasons mentioned above, it would become another corrupt multi-billion dollar boondoggle, and how valuable to society is another mountain peak? (What was that Hal David lyric? --Lord, we don't need another mountain?) Austria, for instance, has considered spending taxpayer money to build motorized mirrors that would light the shadowy, depressing valleys caused by neighboring mountains. Apparently, one man's scenery is another's psychosis.
Taxpayer-funded grid? Also false. I'm sure the electric power companies and their rate payers would love to dupe taxpayers into buying them some new transmission lines. But that's called "political capitalism" not free market capitalism. If taxpayers should fund an expanded electric grid, then how could they refuse to fund a nationwide network of gas and oil pipelines? Petroleum is energy too.
And given the built-in inefficiency of the typical government project, it would cost society twice as much to force taxpayers to fund such a project. It also would encourage the "green energy" grifters to bribe government politicians and bureaucrats to build free power lines to their taxpayer-subsidized windmills and solar farms.
Taxpayer-funded student loans? Ditto: false. Too many people already go to college -- at least for liberal arts degrees. A quick Internet search of "college bubble" shows just how bad things are for fresh grads. Politicians make endless speeches about rising healthcare costs, but college tuitions are rising much faster. Meanwhile, students spend less time studying, grades are inflated, and degrees are worth less. Anyone that took basic economics instead of gender studies knows that Mrs. Clinton's campaign promise of $5000 for every child's college education simply would drive tuition prices up by... $5000.
Still, in the caller's defense, he did later acknowledge that:
Bravo! True. True. True.
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