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The Keynesian Dead End
WSJ ^

Posted on 06/26/2010 5:59:46 AM PDT by shove_it

Spending our way to prosperity is going out of style.

Today's G-20 meeting has been advertised as a showdown between the U.S. and Europe over more spending "stimulus," and so it is. But the larger story is the end of the neo-Keynesian economic moment, and perhaps the start of a healthier policy turn.

For going on three years, the developed world's economic policy has been dominated by the revival of the old idea that vast amounts of public spending could prevent deflation, cure a recession, and ignite a new era of government-led prosperity. It hasn't turned out that way.

Now the political and fiscal bills are coming due even as the U.S. and European economies are merely muddling along. The Europeans have had enough and want to swear off the sauce, while the Obama Administration wants to keep running a bar tab. So this would seem to be a good time to examine recent policy history and assess the results.

[...]

(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; Editorial; Government
KEYWORDS: economics; economy; euronomics; keynesian; marxism; obama; socialism

1 posted on 06/26/2010 5:59:47 AM PDT by shove_it
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To: shove_it

We are talking about socialists whose entire power derives from spending other people’s money.

They will never change.


2 posted on 06/26/2010 6:03:16 AM PDT by Erik Latranyi (Too many conservatives urge retreat when the war of politics doesn't go their way.)
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To: Erik Latranyi
They will never change.

We don't need them to change, the people will do it for them. Enjoy what you can of the summer FRiends because we have one hell of a ride coming our way after Labor Day, but stay vigilant while setting on the porch sippin' your mint juleps while recharging your batteries.

3 posted on 06/26/2010 6:10:54 AM PDT by mazda77 (Rubio for US Senate - West FL22nd - JD Hayworth - US Senate)
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To: shove_it

End? Ha! They’ve only just begun to spend!


4 posted on 06/26/2010 6:12:46 AM PDT by Incorrigible (If I lead, follow me; If I pause, push me; If I retreat, kill me.)
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To: shove_it

Any idiot knows that spending money does not lead to prosperity. It is saving, investment and production that result in increased wealth. The problem is that we are overrun with those who lust after power and those who covet other people’s money. That coalition is a majority. And reason is foreign to them. They are run by their base and immature desires.


5 posted on 06/26/2010 6:13:07 AM PDT by all the best
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To: shove_it
“But the larger story is the end of the neo-Keynesian economic moment, and perhaps the start of a healthier policy turn.”

In Obamas case it has nothing to do with stimulating economic growth, it is entirely all about buying government power and paying off select constituencies. The most transparently corrupt administration and CONgress in history has bankrupted the greatest nation on earth. They are now preparing to double down with their “Robin Hood” scheme by taxing all viable economic endeavors into oblivion.
Capitalism is unfair because “some” people get wealthy. Obama is trying harder to make sure all people get to enjoy misery.

6 posted on 06/26/2010 6:14:26 AM PDT by bitterohiogunclinger (America held hostage - day 507)
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To: mazda77
"perhaps the start of a healthier policy turn"

What healthier policy turn? The only reason there is a policy turn is because they have all finally run out of money to spend. Now that their policies have destroyed the ability to generate jobs, capital, wealth, etc. it's a bit late to think that by not passing additional spending the ship will right itself.

7 posted on 06/26/2010 6:16:00 AM PDT by marlon
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To: shove_it
The cash did produce a statistical blip in GDP growth in mid-2008, but it didn't stop the financial panic and second phase of recession

Never forget that the financial "panic" was CAUSED by the incoming Democratic congress which never wasted a moment in blaming Bush for the economy as soon as they got into power aided by the complicit media who were trumpeting that we were in a 30's depression even when unemployment was at only 6%.

These lies are what caused people to close their pocketbooks and draw back... which spurred on the collapse.

The Democrats and the media knew what they were doing the entire time. They knew they could collapse the economy and Blame Bush for it.

This downturn was NOT inevitable. It was what the Dems planned to get their guy into power.

8 posted on 06/26/2010 6:25:11 AM PDT by Siena Dreaming
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To: all the best
"No nation has ever spent or taxed itself into prosperity."
9 posted on 06/26/2010 6:33:30 AM PDT by newfreep (Palin/DeMint 2012 - Bolton: Secy of State)
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To: shove_it
They'll keep spending as long they get the votes of those who think they can get something for nothing and unfortunately, there's no shortage of these people. They're called Democrats.
10 posted on 06/26/2010 6:33:48 AM PDT by libertylover (The problem with Obama is not that his skin is too black, it's that his ideas are too RED.)
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To: shove_it

Yes, maybe Keynesianism is having its Ceausescu moment. I sure hope so. Now we just need SCOTUS to strike down national-socialist healthcare so that it can never rise again. If those two things happened, we could consider Obama to have been, in some sense, a success.


11 posted on 06/26/2010 6:35:37 AM PDT by Yardstick
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To: Siena Dreaming
From the article:

Like many bad ideas, the current Keynesian revival began under George W. Bush. Larry Summers, then a private economist, told Congress that a "timely, targeted and temporary" spending program of $150 billion was urgently needed to boost consumer "demand." Democrats who had retaken Congress adopted the idea—they love an excuse to spend—and the politically tapped-out Mr. Bush went along with $168 billion in spending and one-time tax rebates.

The cash did produce a statistical blip in GDP growth in mid-2008, but it didn't stop the financial panic and second phase of recession. So enter Stimulus II, with Mr. Summers again leading the intellectual charge, this time as President Obama's adviser and this time suggesting upwards of $500 billion. When Congress was done two months later, in February 2009, the amount was $862 billion. A pair of White House economists famously promised that this spending would keep the unemployment rate below 8%.

12 posted on 06/26/2010 6:55:09 AM PDT by kabar
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To: shove_it

Deficit spending deepens and lengthens the recession. The stimulus was a chance Obama and the Democrats seized upon to raid the public treasury, hoping the economy would then self-correct,as it eventually will if it’s left alone, then take the credit. America has been the victim of the biggest scam in history, and may take years to recover.


13 posted on 06/26/2010 7:01:14 AM PDT by Spok (Free Range Republican)
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To: Toddsterpatriot; Mase; expat_panama

Good read.


14 posted on 06/26/2010 7:02:01 AM PDT by 1rudeboy
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To: shove_it

The only policy that will work is to create an environment that is conducive to business growth. Lower taxes, lower regulation to allow more capital and more human energy to be directed toward business growth and higher employment.

Any policy that moves us away from that will fail.

Any policy that moves us toward that will succeed.

It really is that simple.


15 posted on 06/26/2010 7:12:23 AM PDT by Eccl 10:2 (Pray for the peace of Jerusalem - Ps 122:6)
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To: all the best

“Any idiot knows that spending money does not lead to prosperity.”

Well, actually the point of the editorial was to say there are blithering idiots like Larry Summers and Barack Obama who actually disagree with that assessment. Fortunately, there are real leaders in the world such as Angela Merkel who are more inclined to take an “evidence-based” approach to fiscal and monetary policy. These leaders will rebuff Obama’s self-serving efforts to convince them that the solution to a hangover is another round of drinking.


16 posted on 06/26/2010 7:19:22 AM PDT by DrC
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To: shove_it; TigerLikesRooster; blam; FromLori; rabscuttle385; dennisw
Major article.

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

~~Ludwig Von Mises

17 posted on 06/26/2010 7:33:12 AM PDT by Travis McGee (---www.EnemiesForeignAndDomestic.com---)
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To: DrC

Obama DOES know that spending doesn’t lead to prosperity. Prosperity is not his goal. Power and destruction of all that is good and decent and productive. That’s what his gang is about. They are driven by bitterness, hatred and envy.


18 posted on 06/26/2010 7:46:30 AM PDT by all the best
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To: shove_it

The reality is that the ‘spend your way to prosperity’ model DOES NOT WORK. Never has, and never will.

These wrongheaded, over-educated scumbags use it as a tool by which to advance their cause: The destruction of America and the establishment of a socialist hellhole in its place.

I want no part of it. It’s time to take back the country.


19 posted on 06/26/2010 7:51:55 AM PDT by PubliusMM (RKBA; a matter of fact, not opinion. 01-20-2013: Change we can look forward to.)
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To: libertylover
"They'll keep spending as long they get the votes of those who think they can get something for nothing and unfortunately, there's no shortage of these people. "

And their numbers continue to grow due to higher birth-rates and immigration of like-minded people. Game, set, match.

20 posted on 06/26/2010 8:33:15 AM PDT by The Good Doctor (Democracy is the only system where you can vote for a tax that you can avoid the obligation to pay.)
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To: Erik Latranyi
We are talking about socialists whose entire power derives from spending other people’s money.

They will never change.

As certain countries are discovering these days via the bond markets, even governments sometimes have no choice.

Margaret Thatcher was absolutely right. Eventually, you run out of other people's money.

21 posted on 06/26/2010 9:57:17 AM PDT by jpl (It's "My Big Fat Deadly Greek Riot", coming soon to a bankrupt socialist state near you.)
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To: kabar
Yes, that is the article's take.

I see it differently. I think the snow-job of propaganda in destroying confidence caused the downturn.

Economic prosperity is all about confidence. If a political/media coalition finds the key to changing a nation's mindset they've got economic power and can pave the way to a dictator.

22 posted on 06/26/2010 10:13:09 AM PDT by Siena Dreaming
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To: shove_it

Remember that nobama’s overarching goal is destroying the US economy.

He could care less what the G20, or anybody else for that matter thinks.

He is hell bent on being the USA dictator. In order to do that he needs to drive us down. The quickest way to do that is to destroy the economy.

Look at his “major” accomplishments: taking over GM and Chrysler, nobamacare, diddling while the oil gushes, czars, doing little about illegal, criminal immigration, creating a huge deficit, etc. All designed to trash the economy.

He’s a man on a mission with a compliant Congress: destroy the USA.


23 posted on 06/26/2010 10:18:17 AM PDT by upchuck (Don't let freedom slip away. After America, there is no place to go ~ Kitty Werthmann - Google her.)
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To: Siena Dreaming
The economy is cyclical regardless of who is in the WH. There will be downturns. Bush made a mistake with his stimulus package and the Rep controlled Congress went on a spending binge. Obama has put spending on hyperdrive.

A perfect storm is developing for the US. An aging society (10,000 people retiring a day for the next 20 years), Ponzi scheme entitlement programs, immigration policies that import poverty, two wars, and out of control spending for decades have placed us in this position. Obama's policies have made them much worse.

Economic properity is much more than confidence. The numbers don't lie.

24 posted on 06/26/2010 11:01:26 AM PDT by kabar
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To: kabar
Economic properity is much more than confidence. The numbers don't lie.

And numbers reflect confidence, obviously. When you have huge swathes of the population dependent on the dole without the corresponding revenue you have fear, not confidence.

Yes, of course there will be downturns. However, some are much more prolonged than they should be because certain politicians GET their power when the economy is in the dumps.

I have no doubt that Pelosi & Co. (aka the MSM) lied to push the downturn down much lower than it had to go. And they keep it down now because they will not benefit if things ease. Easing would be an indication that business is hiring...in other words the private sector is gaining confidence again. They DON'T want that because the private sector is not their consituency...GOV'T is.

25 posted on 06/26/2010 11:32:56 AM PDT by Siena Dreaming
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To: Siena Dreaming
We have some very serious structural problems. The entitlement programs and debt servicing costs make up more than half the federal budget. Those costs will increase as the population ages. It is just a matter of demographics and unsustainable entitlement programs.

Add to this an immigration policy that brings in 1.2 million legal immigrants a year, most of whom are poor and uneducated, plus another 500,000 to 1 million illegals. We are bringing in 125,000 legal foreign workers A MONTH right now while 25 million Americans look for full time employment.

125,000 brand new foreign workers with work permits each month -- HERE'S THE PROOF

26 posted on 06/26/2010 2:11:43 PM PDT by kabar
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To: kabar

I’m not sure what point you’re trying to make.


27 posted on 06/26/2010 2:46:23 PM PDT by Siena Dreaming
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To: shove_it
It doesn't take a rocket scientist to figure this one out. If increased government spending really does increase GDP, then why not have the government spend even more than it does? Why not increase government spending to $10 trillion a year? The same question can be applied to the minimum wage. If raising the minimum wage is good for the economy, then why not raise it to $1,000 per hour?

And thus the disconnect between academia and reality is exposed. Reality shows that increasing federal spending actually decreases GDP. Reality also shows that increasing the minimum wage increases unemployment and decreases GDP. But then the ivory tower idiots that are currently in power are blind to the lessons of actual experience.

28 posted on 06/26/2010 2:54:53 PM PDT by Hoodat (.For the weapons of our warfare are mighty in God for pulling down strongholds.)
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To: Siena Dreaming
I gathered that. My point is that the US has very serious economic problems that did not arise just because Obama is President. He has made the situation worse, but we have been headed for a fiscal train wreck for some time. We have been spending beyond our means. And the fact that by 2030 one in five Americans will be 65 or older, twice what it is now, will cause our entitlement programs, already unsustainable and representing an unfunded liability of $60 trillion over a 75 year period, to bankrupt us. And one other fact, state pension funds already represent a $3 trillion liability. Where is the money going to come from?
29 posted on 06/26/2010 3:16:22 PM PDT by kabar
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To: kabar
We all know that we have serious problems.

We have all been aware of the entitlement problems for years.

These problems have been exacerbated in a frightening way by this administration which has loaded us with another huge entitlement (healthcare) which the Dems and MSM have pushed mercilessly and they drove down the economy to get it.

It's the same thing that happened under FDR and prolonged the depression. Sure there were economic problems then, but those could have been alleviated by easing draconian punishments on business. You will never have an improved situation by punishing business which is the very engine to improve economies.

But socialists WANT it this way...as did FDR. They pushed hard for a much steeper downturn than was warrented in '08 to GET power and to MAKE IT WORSE.

In answer to your question...where's the money coming from? We will not have enough to pay for unsustainable entitlements. Spending cuts are going to come. I believe that the terrifying way this adminstration is running things will give the next President the political capital to make them, happen; if one thinks it's not possible one should look at Europe which is accomplishing cuts even though many said it would never happen there.

30 posted on 06/26/2010 3:36:23 PM PDT by Siena Dreaming
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To: Siena Dreaming
We all know that we have serious problems. We have all been aware of the entitlement problems for years.

And we have done nothing about it. By 2014, 45% of all Medicare expenditures will come from the General Fund. By law, 75% of the costs for Medicare Parts B and D come from the General Fund.

These problems have been exacerbated in a frightening way by this administration which has loaded us with another huge entitlement (healthcare) which the Dems and MSM have pushed mercilessly and they drove down the economy to get it.

Yep, we just added another huge entitlement program. Bush gave us Medicare Part D, Prescription Drugs, which represents an $8 trillion unfunded liability. That was passed by a Rep-controlled Congress. And Bush tried to get an amnesty passed, which would have destroyed this country with the stroke of a pen. Amnesty passed in the senate in 2006 [Hagel-Martinez], but was killed by the House. Bush tried again in 2007 with McCain-Kennedy.

In answer to your question...where's the money coming from? We will not have enough to pay for unsustainable entitlements. Spending cuts are going to come.

The spending cuts are going to have to come from the entitlement programs otherwise nothing will change. If nothing is done with the entitlement programs, they will consume over 70% of the federal budget by 2060 and that is not counting Obamacare.

The question is whether we will have the political will to make such cuts. Will seniors, government employees, and others vote for politicians who will gut their benefits? In Greece, they demonstrated against such cuts even if it meant the country would go down the tubes. We have some very hard and difficult decisions to make as a country. I don't see many politicians with the courage to make them nor do I see many Americans willing to make the sacrifices necessary. Almost half the people in the country pay no income taxes.

31 posted on 06/26/2010 4:40:07 PM PDT by kabar
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To: kabar
The spending cuts are going to have to come from the entitlement programs otherwise nothing will change.

We all know this.

The question is whether we will have the political will to make such cuts

Already addressed in my previous post.

32 posted on 06/26/2010 5:10:02 PM PDT by Siena Dreaming
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To: Siena Dreaming
Knowing is not doing it. And no, you didn't address the issue of whether we have the political will or not to address these problems. Nothing will be done until we have a major crisis and then there will be some very draconian measures the will have people in the streets like Greece.

In 1950 there were 16 workers for every retiree. Today there are 3.3, and by 2030 there will be two. We are leaving our children and grandchildren with a very bleak future.

33 posted on 06/26/2010 5:21:46 PM PDT by kabar
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To: shove_it
The biggest draw of Keynesian economics is handling all that money.

The government takes it (literally), pockets a little for itself, then passes it step by step on down the food chain, each and every bureaucratic step taking a little bit for itself. For administrative expenses, doncha know.

That's Keynesian trickle down. They take your money at the point of a gun and by the time they give it back to you to "stimulate the economy" it has trickled down to pennies on the dollar.

34 posted on 06/26/2010 6:40:58 PM PDT by GBA (Resistance is Constitutional!)
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To: kabar
And no, you didn't address the issue of whether we have the political will or not to address these problems

I did address it.

Re-read the last paragraph of the post I cited.

35 posted on 06/26/2010 6:41:14 PM PDT by Siena Dreaming
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To: shove_it

BM

Nothing will change.

The same Totalitarians might stop spending AS much for a little while but the same morons will vote for the same Totalitarians over and over again.


36 posted on 06/27/2010 3:47:52 PM PDT by Para-Ord.45
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