Have a listen here.

Myron Ebell, Director of CEI’s Center for Energy and Environment, takes a look at the brewing Solyndra scandal. Solyndra is a company that makes solar panels and recently declared bankruptcy. In 2009, the federal government gave Solyndra a $535 million loan even though its own analysts predicted the company would go bankrupt in 2011. The company’s cozy relationship with political figures, including a major political donor with an investment stake, make the loan — and its low interest rate — look rather suspicious.

Have a listen here.

In a speech tonight, President Obama is expected to announce the creation of a government infrastucture bank as part of his plan to reduce unemployment. Vice President for Policy Wayne Crews explains why it won’t work as planned, and offers an alternative idea: liberalization.

Democrats are now being careful to frame their job-creation agenda in language excluding references to any stimulus, even though their favored policies for ending the deepest recession since the Great Depression are largely the same.

The article continues:

Recognizing the unpopularity of the 2009 package, however, Democratic leaders have revised their message with less loaded language – “job creation” instead of “stimulus” and “Make it in America” in lieu of “Recovery Act” – in hopes of tackling the jobs crisis.

Spending bills work by taking some money out of the economy and then putting it back in, minus transaction costs and political malfeasance; one can see why they don’t have much effect. The thinking is that Congress can invest money more wisely than private investors. If Solyndra is any indicator, that isn’t true.

Public opinion has soured on spending bills after some initial optimism. That same public also wants its politicians to do something, anything to get the economy going.

But the only tool available to Congress is spending. That’s why politicians insist on following the same failed policy over and over – it is their only tool. The only alternatives are doing nothing, or actively paring back spending and regulations. And those don’t look nearly as glamorous on camera.

Stimulus, spending bill, job creation bill – a rose by any other name has thorns just as sharp. And this particular rose refuses to bloom. That means it’s time to try something else. Maybe reducing spending to sustainable Clinton-era levels, which isn’t even particularly austere. Congress should also try a deregulatory stimulus sometime.

Morici said there could be some economic growth at the end of this year and the beginning of next year, because with the rebuilding, “largely what we’re going to get is a private-sector stimulus package.”

Morici fell for the broken window fallacy; if a kid (or a hurricane) breaks a window, it creates a job for the repairman. He then spends his wages on other things, and the economy gets a boost. Why not break every window in the entire country, then? Think how much wealthier everyone would be if only a hurricane would come along and level the entire nation!

Morici could well be right that Irene could cause a small GDP boost. But that doesn’t mean that America is richer for having endured a natural disaster; hurricanes are not stimulus packages. St. Lawrence University economist Steve Horwitz draws a useful dichotomy that can help us understand what’s going on here:

GDP measures a flow of activity, not a stock of wealth. Destroying things and then rebuilding them might increase economic activity in the area affected (by drawing resources from elsewhere), but leaves us with less wealth than we would have had without the disaster. That is the real meaning of the Broken Window Fallacy.

Irene destroyed billions of dollars of America’s stock of wealth. Getting back to where we were before the hurricane will probably give a boost to GDP. But we aren’t wealthier for it, even if GDP does look better. If nothing had been destroyed, all the time, energy, and materials put into playing catch-up would have been put into making something new.

If hostile aliens invade the planet, “this slump would be over in 18 months,” according to New York Times columnist Paul Krugman. It’s a bizarre way to express a bizarre idea: that war is good for the economy.

He draws an analogy with World War II, where the massive military buildup – conscription is left unmentioned – reduced unemployment and caused GDP to skyrocket.

The Independent Institute’s Mary Theroux points out:

The World War II years were a time of shared privation, with virtually every item that we take for granted today either rationed: e.g., meat, gasoline, sugar, clothing; or not available at any cost: e.g., new cars, appliances, etc. The American standard of living throughout World War II remained at an excruciatingly low level that no 21st century American would accept.

War does not create. It can only destroy. True, aggregate numbers like GDP can thrive during such troubled times. Workers were cranking out munitions like nobody’s business. But those workers’ actual standard of living was not high; everyday essentials were being rationed.

That’s the peril of relying on GDP as an economic barometer. It certainly has its uses. But over-reliance on it has made Krugman ignore other, harsher aspects of war. The fighting. The dying. The separated families, in some cases made smaller by the economic stimulus. The privation at home. The lost opportunities, economic and otherwise.

Krugman’s claim that an alien invasion would stimulate the economy is as alien to the economic way of thinking as our new overlords are to us.

Fortunately, not everyone is taking him seriously. A satirical Twitter account, @KrugmanAliens, is poking devastating fun.

Some readers might also be interested in this working paper I wrote a few years ago about the economics of war.

Larry Summers, who should know better, committed the economists’ cardinal sin this morning: he fell for the broken window fallacy. The sunny side of the destruction is that it will boost the economy. Just think of all the jobs that will be created by the rebuilding process!

Over at the Daily Caller, I gently correct Summers. Natural disasters are bad for the economy. All the rebuilding activity in the next few years will only get Japan back to where it was. If the tsunami had never happened, all that energy could be put to creating new wealth. Disasters are just that: disasters.

Looks like one of the staff writers at The Onion may be an economist: Revamped WPA To Create 50,000 New Jobs By Disassembling, Reassembling Hoover Dam

This especially made me laugh:

Other public works projects currently underway include the bulldozing of libraries, the burning of national forests, and the defacing of public murals, which will be followed by a massive plan to rebuild libraries, revive national forests, and repaint public murals.

Most people doubt Congress’ ability to spend money wisely. The stimulus has given them some proof:

-$800,000 for an African genital-washing program.

-$700,000 to create computer software that can tell jokes.

-$40,000 for ten trash bins.

-$1.6 million to irrigate a golf course inTexas.

-Thousands of dollars to replace – twice – a sidewalk “that doesn’t front any homes or businesses, and leads into a ditch”

-300 truckloads of oyster shells.

Bonus non-stimulus spending: “[T]he Census spent $23,000 on a totem pole in Alaska. Census representative Hector Maldonado says the agency thought it was a great idea. The plan was to increase participation in Alaska, but despite the totem pole, participation dropped in the state by two percent from the last census.”

A new NBER working paper from Atif Mia and Amir Sufi finds that the Cash-for-Clunkers program didn’t work. Here’s part of the abstract:

We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.

In other words, cash for clunkers didn’t change how much people spent. It only changed when they spent. Sales were higher than normal during the program, and lower than normal after.

As the data come in, they are proving what theory predicts: fiscal stimulus doesn’t work. President George W. Bush tried Keynesian stimulus in 2001. It didn’t work. He tried again in 2003. It didn’t work then, either. President Obama’s stimulus programs aren’t faring any better. It’s time for a different approach.

Telling the truth to one’s superiors is hard. Especially when the stakes are high. Christina Romer comes to mind. Brilliant economist. She’s done excellent work on the role of monetary policy during the Great Depression.

A partisan Democrat, she was summoned to Washington soon after President Obama’s election to advise him. All of a sudden she endorsed the Bush-Obama views on stimulus. This is a 180 degree turn from her previous views. Romer’s own academic research shows that fiscal stimulus’ effects are too small to do measurable good.

Romer the economist believes that most business cycles have monetary causes. Not fiscal. Monetary. Romer the economist had been very consistent in expressing that view. But that view changed as soon as she arrived in Washington and Romer the economist transformed into Romer the political advisor. Suspicious.

This is not a new phenomenon. Politicians from both parties have been using economists for as long as economists have let themselves be so used. Politicians love the air of legitimacy that pointy-headed academics can give to their proposals. And economists love the sudden rush of attention and name recognition — and the professional prestige that will long outlast the current administration. They are happy to sell out. Or is it buying in?

That thought was sparked by reading about F.A. Hayek mourning the death of some of his colleagues’ integrity back during the Reagan years:

“You can either be an economist or a policy advisor.

I have seen in some of my closest friends… how a few years in government corrupted them intellectually and made them unable to think straight.”

-Cato Policy Report, Vol. 5, No. 2, February 1983.