Skip to comments.Another Nail In Keynes’s Coffin
Posted on 03/13/2012 11:09:04 AM PDT by Shout Bits
Overall Recovery Act spending has created and saved at least 1 million jobs. Pres. Obama, October 30, 2009
What a difference a few years makes. Early in Pres. Obama's reign of Keynesian in chief, he bragged about 'creating or saving' a million jobs, a conveniently unquantifiable boast. Never mind that this feat cost $787,000 per job, and most people would be happy to be unemployed for that kind of pay. The real story is that job growth never happened until the stimulus ran out, and even though the stimulus was calculated to boost government and union employment, those elements of the work force shrank. Not only did Obama's Keynesian stimulus not work, the opposite of his intent actually happened and things got better anyway.
Obama signed his stimulus act in February 2009, but despite his promises of 'shovel ready' spending, it took about two years to actually spend most of the money. During this time, the US economy shed about six million jobs. After the stimulus act ran its course (early 2011), the US economy added about two million jobs. Every justification of Keynesianism is based on coincidence, speculation, and 'if only' justification, but here is an example where jobs were lost in massive numbers right until the stimulus ran out and then things got better.
Bastiat and Hazlitt would say that an economic recovery starting at the stimulus's end is no coincidence. Stimulus redirects human efforts to the political will of the Keynesians and away from the normal profit seeking of the market. Stimulus actually makes things worse by preventing investment in truly worthwhile efforts and by driving up labor and material costs in general. In other words, it is easy to see the stimulus employees building the airport to nowhere, but it is hard to see the jobs and projects never started because those resources were commandeered by politicians.
To a socialist, the best kind of job is a government job. Obama fought to maintain state and local government jobs in his stimulus act. Cops, teachers, bureaucrats all got special treatment and bailouts thanks to the stimulus act. The cynical calculus is that these union members' dues are a direct conduit to Obama's reelection fund, so saving their jobs helps everyone that matters. Government employment has doubled in the past forty years, but it has actually fallen a bit since the stimulus act. While federal bureaucrats have grown under Obama, state and local employment has fallen by about a half million. Obama's efforts to maintain his base have failed in the face of budgets that must balance.
Obama sought to bolster union and government jobs, but both sectors have lost jobs while the broader market has recovered. Obama sought to 'jump start' the economy through stimulus spending, but the economy lost jobs until the stimulus ended and added jobs thereafter. From the depression caused by FDR's stimulus to the failure of Obama's policies, Keynesian economics is dead.
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Yup, those gummit jobs really have worked well for Greece.
They worked for Soviet Russia also.
Gads, how did Mr Keynes get so d*mned smart?
Aren’t you thankful that we scientists have long (and properly) p*ssed in the general direction of economists?
Since no one has EVER done what Keynes actually said should be done and instead just borrowed, borrowed, borrowed; I fail to see how Zero’s actions provide any nails ....
The sad thing is many if not most Republicans are also Keynsians. Bush believed in cutting taxes but by doing it by borrowing money from future generations. His tax cuts were never matched by spending cuts.
Even Keynes eventually disavowed Keynesian economics.
As long as one group of people can use Keynes to pull money from some pockets to put into other pockets (while keeping some of it for themselves), this zombie will never “die” in the classical sense. 200 years from now Keynes will have proponents.
We've hardly ever done that since the days of Woodrow Wilson.
Keynes never disavowed his theories; what he said was that the US government was ignoring the other half of his equation and therefore our economic system was doomed to failure.
I swear J.M. Keynes is a zombie who keeps coming back from the dead to eat economies.
John Maynard Keyes, atheist and faggot, keeps having to be nailed back into his coffin because a lot of socialists keep pulling out his flawed and illogical claims.
Does Obama think people in this country are basically stupid?
So, tell us, oh, wise one. What was it that Lord Keynes actually said should be done? No one else has been able to figure it out.
“Keynes advocated deficit spending ONLY during recessions. In good growth times, the government was supposed to be running surpluses and saving for the next recession”
That is correct. I have pointed out in other Shout Bits articles that Keynes’s prescriptions have never been followed during economic expansions. Nobody talks Keynes except when it is time to spend.
That said, the fact that the stimulus side of the Keynesianism never works is proof enough that Keynes’s theories are fatally flawed and should be abandoned.
Use surpluses in the good years to finance deficits in the bad years .... (a.a.e's great abridged version)
No one else has been able to figure it out.
Sure they have, they just don't like the first part so they ignore it!
Oh it works, and quite well actually! Want proof?
Go back how ever many ears you want and for each and every year subtract the deficit for that year from the reported GDP and recalute the "growth". To be even closer to reality, you'd also have to subtract that portion from the Consumer Spending side that consist of Transfer Payments financed by the deficit - but that is almost impossible to calculate ...
That being said, I would also contend that "Economic Stimulus", to be effectual, should also be wisely used - special interest spending buys votes, but does little to stimulate the economy as a whole.
This is going to sound like I'm defending Keynes. I'm not. His theories of the economic cycle and how government should act is the antithesis of my views. IMHO, government needs to be forced to live within it's means. Keynes would have disagreed with me - but not later on when he saw reality at work.
Keynes lived to see how poorly our government did in terms of saving money in good years. That is when he started voicing objections which some here have interpreted as him renouncing his own theories. He insisted his theory would work if only government would actually follow the entire program. And it may have worked - if it had ever been followed.
He realized the error he made which is that governments that are allowed to run ANY deficits, will become addicted to them. Without a mechanism in place to control government spending such as a constitutional amendment, Keynes' theories are junk science.
Will Keynes theory ever be abandoned. I doubt it. Perhaps after national economies in the West really start collapsing under the weight of the debt and derivative bubbles - we may get a break, but I'm not optimistic.
IMHO, this is why I believe the Nobel is dangerous. Too many people actually believe the Nobel committee's findings are gospel and that a Nobel laureate is like a god in their field. Of course, smarter people know better.
You're right -- that was one of his tenets and it is one which has been ignored.
I thought I’d just mention that this thread is very thoughtful and shows that this group has an above average knowledge of economic theory.
Not to get down in the mud here, but I really think most of the people who actually apply Keynesian theory to fiscal and monetary policy don’t understand it as well as you folks who don’t support it.
That's an interesting observation. I do know that pro-Keynesians know virtually nothing about the classical economists, the Currency School, or the Austrian school. I read articles periodically where some Keynesian (Krugman comes to mind) will write dismissively of the Austrians all the while seriously misstating their theories.
The "modern" macroeconomists focus on mathematical formulas to the virtually complete exclusion of economic theory. In fact, they make fun of theory-based economics such as the Austrians and the classicals. To their detriment I think.
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