Corrigan’s “Wrong Way” attribution should be applied to the fiscalists led by Nobelist, Princeton professor and hyper‐productive New York Times columnist Paul Krugman. He argues that the only way to put the major economies around the world back on track is to “stimulate” them via deficit‐financed government spending. There is just one problem: Prof. Krugman and his fiscalist followers are selling snake oil. If nothing else, Prof. Krugman’s “success” proves the wisdom of advice which management guru Prof. Peter Drucker imparted to me over lunch in 1998: “the key to successful salesmanship is nothing more than repetition enhanced by incremental product improvement.”
Statements made by the likes of Nobel laureates carry weight — even if those statements amount to nothing more than factoids. Recall that, according to the Oxford English Dictionary, a factoid is “an item of unreliable information that is reported and repeated so often that it becomes accepted as fact.” The famous “Dr. Fox Lecture,” which was presented at the University of Southern California’s Medical School, illustrates just how so‐called “experts” can effectively work and influence a crowd. The lecture was presented by Dr. Myron Fox —an advertised heavyweight — to an academic audience. The response to Dr. Fox’s lecture was unanimously favorable.
Little did the audience know that “Dr. Fox” was an actor who had been cloaked with an impressive fake curriculum vitae and trained to deliver a nonsensical lecture filled with contradictory statements, double‐talk and non sequiturs. When the big guns sound off, they are heard.
In the political sphere, the fiscal factoid is catching on. France has just dumped an economically incoherent Nicolas Sarkozy and replaced him with François Hollande, who is the first Socialist to reside in the Élysée Palace since François Mitterrand did 17 years ago. Not surprisingly, President Hollande is proudly flying the fiscal stimulus flag. And that’s not all.
Greece has just announced that a government couldn’t be cobbled together after the 6 May 2012 elections, and that new elections would be held on 17 June 2012. In the wake of the May elections, the fly in the ointment has been the surge in support for the Coalition of the Radical Left (SYRIZA), which is lead by Alexis Tsipras. Where does SYRIZA stand? A top adviser to Mr. Tsipras, Prof. Euclid Tsakalotos couldn’t have been clearer when he recently rejected fiscal austerity and embraced the fiscal factoid. To finance more government spending, he asserted: “We need a central bank that prints money, euro bonds, and a system that transfers money from rich countries to poor countries.” It looks like Wrong Way Krugman has found his man in Prof. Tsakalotos. Both should be grounded, pending the completion of a short course on the efficacy of fiscal stimulus programs.
Let’s take a closer look at the fiscal facts and the effectiveness of the Keynesian fiscal elixir. Nobelist Milton Friedman addressed the issue in a 1999 Wall Street Journal column (8 January 1999). Prof. Friedman wrote: