Posted on 08/12/2012 12:03:38 PM PDT by Jim Robinson
Does the employment of Keynesian economics actually spark the economy, or merely help those in office keep their jobs?
Low interest rates: check.
Tax breaks: check
Deficit spending to stimulate the economy: check.
Three primary tools in the Keynesian toolbox, used in significant doses in order to combat economic instability. For decades, they have been the central tenets utilized by various governments in numerous battles to stabilize the economy, up to and including the recent devastation wrought by the post-2008 financial crisis. In this latest iteration and via numerous efforts bookended by TARP and QE2, the United States has invested massive dollars into both the private sector and general economic stimulus, simultaneously attempting to snuff out a forest fire with one hand while lighting a match with the other.
According to the National Bureau of Economic Research, the U.S. emerged from the Great Recession in June, 2009, eighteen months after it started — the longest continuous period of contraction and subnormal growth since the Depression of the 1930′s. And yet, despite over $4 trillion in deficit spending since the start of the financial crisis, numerous Gallup polls show fading public confidence in the prospects for economic improvement in the near term. In fact, as of sixteen months ago, 69% believed the U.S. was either in a depression, still in recession or heading toward one.
Does Keynesian economic theory work? First, a summary of its essential underpinnings...
(Excerpt) Read more at decodedscience.com ...
And Romney is on record saying he agreed with TARP and stimulus spending and says more may be necessary. Ryan also went along with this deficit spending. Even voted to increase the national debt limit so Obama could burn through even more. The Republican majority also made no attempt to defund ObamaCare. Keynesians are going to win this election either way and to hell with economic liberty. The government is all about control whether it's headed up by the democrats or the GOPe.
Keynesian economics is Ponzi scheme economics.
Part of the problem is that most Americans are completely ignorant about basic economics.
You can’t keep kicking the can down the road forever. Somebody eventually pays the piper.
In real terms, if there is a country that has completely failed at Keynesian economics, it is Japan.
It still hasn’t recovered from its real estate crash back in 1989, because it has pursued the intellectually bankrupt Paul Krugman/Keynes model of recovery.
Conversely, after the real estate crash in 1997 in Southeast Asia, they pursued the cut taxes and spending model, got their fiscal houses in order, and recovered fairly quickly.
Unfortunately that is the menu being offered.
You can't get fried fish at Pizza Hut.
I don't like to look at it that way. I doubt you want to look at it that way either. I know a lot of others who don't like to look at it that way.
Re-posted to FB. Should drive the ABO crowd nuts.
It’s not Keynesian economics about which we should be concerned; rather it is Kenyan economics which should greatly concern us.
It’s not Keynesian economics about which we should be concerned; rather it is Kenyan economics which should greatly concern us.
Keynesian economics is political economics. It doesn’t work, never has worked and never will work — as economics, that is. Works fine as a political tactic; just redistributionism by another name.
But then, evidence doesn’t matter to a liberal (see global warming). It feels good, so it’s obviously the right thing to do.
Well, I beg your pardon but it has been all about Keynesian economics. Ever since at least 1913 when the Declaration and Constitution were officially shredded by the gubmint. It’s no longer about God given unalienable rights. The pursuit of happiness no longer applies, much less life and liberty. The Dems and the GOPe have seen to that.
That Hoover was laissez-faire is one of the great myths of the Great Depression:
http://www.mackinac.org/archives/1998/SP1998-01.pdf
That so many people are ignorant of Hoover’s interventionism, is yet another indictment of our dismal public education system.
Deficit spending to hire government employees does nothing but take money from the most productive (future) employees to put in the pocket of the least productive employees. The demand multiplier is significantly < 1.0, meaning each dollar spent provides less than a dollar of stimulus.
There are a lot of studies that establish why even deficit spending to finance tax cuts is not going to work for the US anymore, because consumers are spending the money to grow the Chinese economy, not ours.
Estimates of aggregate demand multiplier for the current stimulus range from 0.30 to 0.60. That means we've borrowed a $1.00, which will be repaid as around $1.15 when all is said and done, and have received at most 1/2 of that back (and more likely even the low estimate is high.)
The only deficit spending that can actually yield aggregate demand over 1.0 appears to be spending on R&D. Unfortunately, the government has proved it can't figure out where to put that money (and never has been able to, except when it went to the Defense Dept, which isn't going to happen under Kenyan/Keynesian "economics.")
A very very good book to read is this one:
Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong.
0bama's "economic" advisers had been telling him he would get demand multipliers of 2.0 - 2.5, based on their "analysis" of past deficit spending. Of course that's a crock. If politicians could get economic improvement by spending money they didn't have, no politician would ever lose his job, and all of us would be speaking Russian.
Hell yeah. If we could spend our way into economic prosperity, we’d all be rich by now.
Roosevelt praised Hoover effusively until the Democrat Congress decided to sandbag his lib/prog programs. The correct Laissez-faire predecessor of Roosevelt is Coolidge, not Hoover. Hoover was the prototypical RINO, who even considered switching parties in 1920, but made his decision not to on the basis of the fact that the only Democrat pol he'd ever known was a drunk. The Ben Stein school of "conservatism."
Walter McLaughlin’s article barely touches on the problem of Keynesian Economics. It is too bad that when one brings up this subject of such important economic impact on our nation, they would bring up so few economic facts.
Teaching the business deficit electorate the truth on Obamanomics and it’s Keynesian Economics addiction will be the challenge. It is obvious the Lame Stream Media, as Sarah Palin calls it, slept through their Econ 101 classes, and is not up to even the most modest of challenges. It is time the truth of Keynesian Economics as a failed economic theory—I emphasize theory—be put in the spotlight as the failed system it is.
Obama and his White House have been preaching the religion of Keynesian economics from the beginning. In fact, Big Government has had Keynesian economics in their blood since President Hoover. It is a method by which government inflates demand by putting money into peoples’ pockets to spend on products, thus, stimulating productive segments of the economy that would have otherwise remained idle, to produce wealth. They would argue that the poor are more likely to spend that money rather than keeping it from circulation by saving it. This behavior, Keynesians argue, guarantees even more generation of wealth. Eric Cantor comments that the theory is: “government can be counted on to spend more wisely than the people.”
The problem is demand does not generate wealth, capital, both human and material, does. Wealth is generated by the accumulation of income producing assets or what economists call capital formation. Keynesian economics fails because government mis-allocates resources, and because government can’t create wealth. It can only move it around.
Paying someone not to work does not grow the economy. When someone spends all of their money instead of saving or investing it, they will never be wealthy. They become dependent on the system.
Keynesian economics fails because of an effect called “Crowding Out.” Simply put, for every dollar of government spending, private investment must be reduced by the same amount. Since the government does not have a surplus of money to spend, it must sell treasury bills to finance this spending. Thus, personal and corporate savings are used to buy these T-bills, and these funds are no longer available for private spending and private investment. Thus any increase in government spending is exactly offset by a reduction in private investment and private spending.
When Keynesian policy fails to stimulate, the chorus from the left will be that the government didn’t do enough and didn’t spend enough. This is the chorus of a population dumbed down by a government controlled education system. The government will rush out an even larger stimulus package, but this time our Asian benefactors might not be so quick to finance it. In fact, they may decide it’s time to cash in their chips. If that happens, hyperinflation will ensue decimating what is left of the consumer’s purchasing power.
It should be common sense to know that Keynesian economics is a failed economic theory. Economic stimulation only increases the national debt and passes that debt on to our future. Austrian economics is the way to go. It is the Austrian economic model, that Paul Ryan knows well, that is the quickest road to recovery.
After 70 years of unrelenting falsification of history by progressive university professors the truth effectively hidden in plain sight.
The simplest way to understand the essence of Keynesian “economics” is to imagine a personal situation and consider whether to resort to Keynesian policy to deal with it.
As an example:
You get a call from your bank that your bank account is overdrawn and all of your bills, mortgage, food, utilities and the bill for the kid next door mowing your lawn. Also, your wife wants to get a face lift and you want a new wide-screen HDTV.
The Keynes Fix: Take out the checkbook for the overdrawn account and write a check for the amount you are overdrawn plus the total of your bills, the new HDTV and your wife’s cosmetic surgery and then add a 100% “cushion” so that you won’t have to worry about it until “sometime down the road.”
Now, deposit big check into the overdrawn account on which it is drawn and SHAZAM - the problem is fixed!
But in the end that policy is sure to fail??
In John Maynard Keynes’ own words, “..In the end we will all be dead.”
In other words, we could care less, it is a problem for our grandkids......
The Democrats version is to always raise taxes and increase spending at the bottom and at the top. I call it pseudo-Keynesianism.
Staring with Bush Jr., Republicans have embraced the "stimulus" concept. They eschew the Keynesian label, but they buy the notion of "jump starting" a weak economy by the fiscal intervention of genius government poobahs.
As Nixon said, we're all Keynesians now. "Stimulus" has become Washington conventional wisdom.
Not only did Ronald Reagan never talk about "stimulating" or "jump starting" anything, he tried to forbid his staff from using the phrase "tax cuts". He stood for long term structural tax reform.
I'm nervous but hopeful about Romney/Ryan. Romney decries further "stimulus" (I truly hate that word) and Ryan is seriously trying for long term reforms. Neither are perfect, but they are running on a message of economic freedom.
Excellent post. Especially these 2 points:
“Deficit spending to hire government employees does nothing but take money from the most productive (future) employees to put in the pocket of the least productive employees. The demand multiplier is significantly < 1.0, meaning each dollar spent provides less than a dollar of stimulus.
There are a lot of studies that establish why even deficit spending to finance tax cuts is not going to work for the US anymore, because consumers are spending the money to grow the Chinese economy, not ours.”
Cash for Asian clunkers.
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