I’ve written before about the doctrine of immaculate transfer in international macroeconomics, which is a common fallacy but not, I’ve suggested, one that rises to zombie status.
There is, however, a somewhat related doctrine — call it the doctrine of immaculate crowding out — which has now, I’d argued, achieved true zombiehood. That is, it keeps coming back no matter how many times you kill it.
The most recent example came from John Boehner’s Wall Street talk, where, as Bloomberg puts it,
Boehner’s statement in his Wall Street speech that government spending “is crowding out private investment and threatening the availability of capital” runs counter to the behavior of credit markets.
“Look at interest rates. Look at capital spending,” said Nariman Behravesh, chief economist of IHS Inc., a research firm based in Englewood, Colorado. “It’s very hard to come to a conclusion that there’s any kind of crowding out.”
Well, yes. If you believe that government spending has to crowd out private spending by actually changing incentives, namely by raising interest rates, you have to confront the fact that rates are historically very low, even for business borrowers:
nullBut it’s now an article of faith on the right that government spending must crowd out private spending, no evidence is necessary. And one must say, alas, that this view has been promulgated by supposedly serious economists.
And the thing is, at this point no amount of facts and logic will dislodge that article of faith. It’s pretty hard to kill a zombie.