The Fatal Conceit

March 11, 2009 — -- We've been rolled again.

Sure, the economy is in bad shape -- though the late '70s and early '80s were worse in many ways -- but is it true that every economist agrees that massive "stimulus" is the solution?

"A failure to act, and act now, will turn a crisis into a catastrophe," President Obama said.

If someone expresses skepticism, Obama and other political leaders suggest that economists are unanimous in believing that government spending is the only answer.

"We have a consensus that we need a big stimulus package that will jolt the economy back into shape," Obama said.

House Majority Leader Steny Hoyer agreed: "Every economist from right to left, Republican, Democrat, advises that it has to be a very substantial package."

It's a lie. There was no consensus. Anyway, a consensus doesn't mean something is true. Finding an economist who opposed government spending as a way to fix the economy was easy. More than 350 signed a petition opposing the bill. You can hear some of them on "20/20" today at 10 p.m.

"How is it the government is going to be able to spend a dollar in such a way that it generates a dollar or more in value?" said George Mason University economist Peter Leeson. "A more likely possibility is that a dollar that government takes out of the private sector is a dollar the private sector doesn't have to spend."

Leeson is referring to the "broken-window" fallacy, which comes from Frederic Bastiat's story about a boy who throws a rock through a shop window. Because the shopkeeper has to buy a new window, some believe the mischief will actually stimulate the economy. The fallacy lies in overlooking that the shopkeeper would have spent the money some other way if he didn't have to replace the window.

Every penny the government spends will first have to be borrowed from someone in the economy. So where's the stimulus?

It's also quite a conceit to believe that a few men in power are smart enough to know precisely how to spend trillions of your dollars.