REALITY CHECK NEWS AND OBSERVER. BLINDED BY BIAS.

Posted on 22. Jan, 2015 by in Uncategorized

The News and Observer’s visceral dislike for the new conservative majority in the Legislature goes so far that it often blinds them to facts. That’s obvious comparing one of editorial page Editor Ned Barnett’s recent salvos with a factual Wall Street Journal piece by Morgan Stanley’s Emerging Markets expert.

Mr. Barnett sang the old song that more government spending is the key to growth, bashing the Republican Legislature for controlling spending. The Morgan Stanley guy pointed out emerging market nations like China are turning away from big spending because the more they did, the less it helped.

Mr. Barnett wrote “Indeed, the state economy would be better off but for Republican policies that have held down government spending and government hiring. During the last four years of sluggish economic recovery, the state economy could have used the stimulus of government investment rather than a withering of government spending.”

Ruchir Sharma at Morgan Stanley explained “Before anyone rushes to spend, however, it is worth noting that the big emerging nations—China, Russia and Brazil—have just tried a full-throttle experiment in stimulus spending, and it failed. The average growth rate for emerging economies excluding China has fallen to 2.5% today, from more than 7% at the height of the spending campaign. The growth rate is the lowest in four decades, outside of a global recession. For leaders in these countries, stimulus is now a bad word.

The emerging economies embarked on a spending campaign that dwarfed its counterparts in the U.S. and Europe. Among the G-20—the major emerging and developed economies—the developed nations spent a sum equal to 4.2% of gross domestic product on stimulus in 2009 and 2010, based on data from the International Labor Organization (ILO). The emerging ones spent more than half again as much, 6.9% of GDP.

And all that spending hasn’t worked. “Since 2010, the growth rate in China has fallen by a third and is headed below 7%. Brazil is in recession. Russia, which spent a staggering 10% of GDP on stimulus, is now contracting sharply.

What happened? Emerging nations borrowed from the future to produce that flash of growth in 2010, and now they face the bills. Their government budgets have fallen into the red, from an aggregate surplus of 1.5% of GDP in 2007 to a deficit of nearly 2% of GDP in 2014. ”

So now emerging market leaders are getting off the stimulus train. “As usual, the developed world is paying little heed to these lessons, even though emerging nations now account for 40% of global GDP. Western leaders are calling for more Keynes even as emerging-world leaders admit that their own stimulus experiments backfired. In May, Chinese Premier Li Keqiang warned that using stimulus to generate growth is “not sustainable” and “creates new problems.” Chinese officials are now taking pains to say that new spending announcements do not represent more stimulus.”

The Chinese might be Communists but they are going capitalist. But the News and Observer remains blinded by bias. They won’t confront the fact government can’t spend us rich.