Skip to comments.Hard times for Keynesians
Posted on 01/07/2012 3:02:24 PM PST by Graybeard58
Accumulated budget deficits of $15.2 trillion and unfunded entitlement liabilities of $117 trillion cannot dissuade Paul Krugman, New York Times columnist and Princeton University professor, from his belief that government must go many trillions more into debt immediately to rescue Barack Obama's presidency.
In his latest column extolling the virtues of the late British economist John Maynard Keynes, Mr. Krugman asserts anew that the nearly $800 billion Obama stimulus of 2009 failed to produce 4 million new jobs and keep unemployment under 8 percent simply because it was too small. (He has argued $2.9 trillion of government pump-priming was the minimum needed.) And he warned anew that "government austerity" imperils economic recovery.
"Slashing government spending in a depressed economy depresses the economy further; austerity should wait until a strong recovery is well under way," Mr. Krugman wrote. In declaring Keynesian economics vindicated, Mr. Krugman begged the question by quoting Mr. Keynes: "The boom, not the slump, is the right time for austerity at the Treasury."
As someone who resides in the ivory tower of academia, Mr. Krugman views the economy as a giant intellectual exercise. If government does A and B, then C must follow because the theory says so. But the real world behaves quite differently. For example, Presidents Kennedy, Reagan and George W. Bush responded to recessions with tax-rate reductions, which produced employment gains, economic booms and tax-revenue windfalls. But in each instance, politicians smashed Keynesian theory to smithereens by spending and leveraging their windfall many times over to buy votes. To politicians, the "right time for austerity at the Treasury" is never.
Speaking of never, the national debt during the Depression, which actually was prolonged by Keynesian fiscal policies, never rose above 50 percent of gross domestic product. For several years now, the federal debt has exceeded 100 percent of GDP and is expected to remain there indefinitely. In other words, the nation, with its declining credit rating, already lacks the collateral to cover its existing and projected debts. And if that's not enough fiscal peril, today's crisis is made exponentially graver by the unfunded liabilities, which did not exist in Mr. Keynes' day.
Finally, federal spending this year is pegged at $3.7 trillion, growing to $3.8 trillion next year, $4 trillion in 2014, $4.2 trillion in 2015, $4.5 trillion in 2016 and so forth. Government debt likewise is scheduled to rise every year indefinitely. Only to the trained Keynesian eye can annual increases in budgets and deficit spending be construed as "slashing government spending."
Ping to a Republican-American Editorial.
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We are able to maintain the strength of the dollar by NOT pledging those well known assets to back the full faith and credit of the United States. It's enough for others to know the assets are there.
As far as Keynes is concerned, he was an idiot. His theories have been fully discredited over time. It's incredible there are still those around who imagine this guy is still appropriately cited as an authority.
We live in a time when we have incredibly detailed data available about everything and everyone. Shooting shotgun shells into the side of a barn is not the sort of augury that augers well. Computer models do much better ~ and I have yet to hear of a single one that was able to do the Keynesian thing.
True. Keynes never said to have continual deficit spending. Keynes said to balance the budget by running deficits in recessions, but then to pay back all that debt in the good times by running surpluses.
The USA has NOT been following Keynesian economics.
Dont blame Keynes, blame somebody else.
Assume libtard #1 jumps out of an airplane w/o a parachute at 2000 ft. because he read it would be OK on a libtard blog site, but hits the ground and dies on impact. Libtard #2 comes along & says the reason libtard #1 died is that he didn't jump out at a high enough altitude, and at least 10,000 ft. is necessary. Worth trying?
“Libtard #2 comes along & says the reason libtard #1 died is that he didn’t jump out at a high enough altitude, and at least 10,000 ft. is necessary. Worth trying?”
Definitely worth trying if Libtard #2 is Krugman. I would only be too happy to assist him in jumping from the plane.
They never take into account that if that much money is produced, then the result is going to be insane inflation because no one will want to work hard for the money.
Money is only worth something if the average man perceives it as having value.
That is what I was taught in college, too (45-50 years ago). Unfortunately, politicians are incapable of doing that. They spend in bad times and spend more in good times. They NEVER build a surplus. I don’t know if Keynes was right or wrong. However, I do know that it has never been tried.
Any person who passed boys around at homosexual orgies-—has a very twisted ugly, worldview. WHO would ever WANT to have anything to do with SUCH A twisted MIND????
Isn’t it funny/sarc. that Hollywood ADORES Keynes.....and protects those producers who raped Corey Feldmen and the other Corey and passed them around-—like Keynes????? Why isn’t Jerry Brown forcing the Attorney General to put those pederasts in prison INSTEAD of trying to normalize sodomy in the minds of 5 year olds and forcing them to celebrate a pederast like Harvey Milk??????
Jerry Brown, are you truly that EVIL and twisted in your thinking? Are you so ignorant of Freud and the latency period or are you a pederast like your Hollywood idols who portray evil sodomy as “good” and “fun” and “beautiful”????
Even Machiavelli knew Virtue was necessary for free Republics.
John Maynard Keynes observation in "The Economic Consequences of the Peace - 1920":
"Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method, they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. . . . Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. . . . (It) does it in a manner which not one man in a million is able to diagnose. . . ."
Did Keynes ever think for a moment that if governments could create wealth we’d never have recessions?
Then, if they borrow deflated money back to build up a debt they further strangle the economy and make deflation worse than anyone imagined it could be.
Back to the beginning of this cycle ~ there is no cycle because government not only controls the money supply, it creates the money, and it doesn't matter if it's paper, or of it's gold, it's only money if the government says it's money.
All efforts by government to manipulate money create deflation.
Keynes advice guaranteed higher and higher unemployment, lower and lower prices for products ~ so low no one could afford to make more of those products ~ and massive unemployment.
Somebody is going to ask where inflation comes from but that's a different process.
I wonder what would be more of change for me.
Seeing the world as a goldfish does or seeing the world as Paul Krugman does.
The superlative of stupid is Krugman.
Ask any leftie about the great depression, and they will bring up the Hoover Dam (which, ironically was planned before the great depression in the Hoover Admin). They all (all) think that New Deal WPA makework was how we emerged from the depression.
Nowadays they think that they have a more sophisticated Hoover Dam model, think green energy and high speed rail here.
He advocated cutting taxes to increase the deficit when the cycle was in a depression to increase consumer spending and raising taxes to cut the deficit when the economy improved to 'soak up consumer spending'.
His goal was to control consumer spending,never to place Government spending in balance.
His goal is simply to make the next generation pay the bills.
See the youtube video on the debate between Hayek-Keynes on the business cycle.
Gov't printing of money and expansion of credit, creates the 'boom' (keeping interest rates artificially low) which in turn, leads to the 'bust' when the money runs it's course.
Thanks for the link, I recommended another poster to watch that very video.
Make work projects that either could have been done by the Free Market faster and cheaper or unnecessary boondoggles (the bridge to nowhere)
We are all Austrians now!
True, leftists never apply the “building a surplus” side of Keynesian economics, but that doesn’t change the fact that government spending is a grossly inefficient way to allocate capital and it has never worked, no matter how many times the leftists try it. It stimulates votes, but nothing more.
His name was “Keyne”