What really bothers me is the inability of our government to learn from its own mistakes. In Washington, they do the same thing over and over again, and expect a different outcome. Albert Einstein defined that as insanity.
George Bush sent everybody in the U.S. a check for $500 to kick start the economy by spending the money. Over 80% of those checks went directly into savings accounts, or to pay down credit bills. Nothing happened to the economy. Then Obama got Congress to stop collecting payroll taxes on individuals. If you have read anything much in the past two years you know nothing happened and retail sales stayed flat (Except, of course, for Tiffany's, e.g.). And savings went up.
Now Obama wants to repeat this absolutely failed behavior.
And the story gets worse. There is an economic concept that explains this behavior perfectly. It is called the Savings Paradox and has been observed since 1741!! Every college economics text includes it.
The Savings Paradox says that when the economy is contracting, individuals and households will reduce their spending and increase their saving because the future is unknown and threatening. Makes perfect sense, right?
However, when everyone reduces spending and increases saving, the economy fails to grow so behavior that is good at the individual level is harmful at the government level, hence the Paradox.
Every economist who has ever come with spitting distance of the Cowardly Lion knows about the Savings Paradox, so why hasn't someone explained it to him?
Which brings up the second example of an inability to learn, this time from the mistakes of others. Alexander the Great, Genghis Khan, among others, and including the Russians lately, have lost armies in Afghanistan. The same way every time. Now we are losing an army in Afghanistan in exactly the same way.
Why can't we learn?
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