By David Cay Johnston
The views expressed are his own.
Every day we hear politicians and pundits say that government spending cannot lift the economy out of the worst slump since the 1930s, which is as sensible as saying that 2-1=3 or that water and flour make steak.
Those who said after President Barack Obama’s speech last week to Congress that government does not create wealth, does not create jobs and cannot stimulate the economy spoke nonsense. So do those who say that only private business creates wealth, as if any revenue going to taxes destroys wealth.
Adam Smith, who figured out market capitalism in his 1776 book “The Wealth of Nations,” could set them straight. We have plenty of equally competent economists who understand these issues today. They just do not get the attention that the news media lavish on high-profile politicians and pundits who speak with absolute certainty on matters about which their words show they know nothing.
So why are politicians and commentators who speak economic nonsense treated as sages? And why do so many journalists uncritically repeat their nonsense?
Sadly, the answer is that too few people in public life understand economics, numbers or algebra. Too few people learned, or remember, the crucial concept underlying matters of economics and finance known as accounting identities.