Houdini economics

You probably didn't see Rep. Mike Kelly, R-Pa., take Congress to the woodshed on Thursday, but the performance is worth watching (see video clip below)-and not just for the scolding he delivers. In his remarks Kelly was able to connect with the common man by offering a lesson in Houdini economics.

During an Education and Workforce Committee meeting, the first-term congressman initially criticized Democrats, but he quickly shifted gears from partisan politics to bread-and-butter economics, alternately showing frustration with Democrats and, seemingly, with Congress as a whole.

Kelly, who is also a Butler, Pa., car dealer, made a good point when he noted that business owners like him are hesitant to take risks that could put people back to work when "Houdini" (the federal government) is running the economy. He said that Houdini economics-massive government intervention-causes uncertainty on Main Street and stalls economic recovery.

And it's not just regular Americans who are uncertain about the nation's future. Federal Reserve Chairman Ben Bernanke appeared confused last week when he admitted in a news conference that he isn't sure why the Fed's money-pumping isn't having the desired effect. The Wall Street Journal's Neal Lipschutz said, "If Bernanke had the last wand in town, it's not magic." What this means for the average Joe is more uncertainty and an extended period of high unemployment.

Henry Hazlitt pointed out long ago in his book Economics in One Lesson (read it for free here) that economic meddling frequently produces unintended consequences. In other words, Houdini's well-meaning policies often create unforeseen and undesired outcomes. But the government's track record isn't stopping President Obama. He was in Kelly's backyard last week touting another government intervention program: $500 million to stimulate manufacturing.

What's the answer to the uncertainty and stagnation caused by Houdini's tricks? Kelly on Thursday said, "I've got to tell you something gentlemen: Only in this Beltway are we so far out in la-la land that we don't understand that if America is truly going to recover it's going to be by Americans who make those decisions. Not by Republicans and not Democrats. . . . Our policies make Houdini look like an amateur. We don't understand what it is that made this country great. It is the private sector. It is not [the elected officials] who . . . come up with these ridiculous arguments."

That's a good economics lesson from Professor Kelly.

A dose of humility in Congress would go a long way, pointing toward the realization that government should stay out of economic affairs as much as possible.