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."
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”
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