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Edwards flunks econ
Carolina Journal.com ^ | January 6, 2003 | JOHN HOOD

Posted on 01/08/2003 10:53:09 AM PST by Ragtime Cowgirl

 

Daily Journal

Edwards flunks econ

Daily Journal for January 6, 2003

By JOHN HOOD

RALEIGH - Here we go again: another North Carolina Democrat, running for yet another office, and repeating the same discredited Keynesian nonsense about stimulating the economy.

Sen. John Edwards is running for president, and I wrote last week for National Review that his candidacy should be taken seriously. Okay, let's do that. He unloaded yesterday on ABC's "This Week" program on President Bush's impending proposal for tax cuts, making the same old foolish argument that Erskine Bowles made last year about how lowering taxes on rich people doesn't stimulate the economy because they will save rather than spend it.

John Maynard Keynes made this argument back in the 1930s, in one of the sillier passages in his famous General Theory. Since, he contended, recessions are caused by too little "aggregate demand," governments should use fiscal policy to get people (or governments directly, through deficit spending) to spend more cash, thus boosting demand high enough to justify hiring more workers to supply that demand. The assumption, you see, is that there is some optimum level of consumption that would serve to maximize employment and growth, even if consumers don't realize it. But to get there, according to Keynesians, you have to try to target your intervention to poor and middle-class people, who are willing to waste any money you give them on items they didn't previously think they needed. Rich people, those miscreants, might just take the cash and save it, which would subvert the goal of the government policy.

This is asinine. This is the kind of mumbo-jumbo that gives economics a bad name. Rational people don't go around hoping their fellow citizens will super-size their fries or buy extra-hold hair spray or rent Emilio Estevez movies instead of investing their money in a biotechnology company that might, one day, cure cancer. But that is precisely what the Keynesians, and now our own Sen. John Edwards, advocate in the name of boosting the economy. In their minds, our economy is suffering from too little consumption. And it's the government's job to correct the error.

Actually, there is no such thing as "too little" consumption, or "too much" for that matter. Such value judgments would require politicians to have some magical means of determining the right amount of consumption, from which reality diverges enough for the politicians to "fix" things. Unless you can read minds or travel through time, this is impossible.

Spending their own dollars, households buy precisely that which they most value among a range of options. If they don't spend all their dollars on current consumption, and instead sock some of it away in the bank or a mutual fund, that means they value what they can buy in the future with that money - say, a car or house, or vacations in their retirement - more than they do extra fries or personal grooming products or that St. Elmo's Fire rental today. Yes, if you hand them some extra cash, some may buy these items on impulse. But if they don't, if those evil rich people save instead of splurge, they are still "doing their part" to boost the economy by putting the money to work on investment projects, ranging from capital construction to high-tech research, that create demand for labor and resources and that will result in higher-value consumption in the future.

It's a shame that Edwards is making the same tired argument that all the other more experienced Democrats are making. He could be distinguishing himself from the rest of the pack by advocating not 1930s-era Keynesian economics but at least 1960s-era Kennedy economics - the kind that focuses on creating incentives for investors and entrepreneurs to create a larger and more productive economy - if not 1980s-era Reagan economics, which actually had a fair amount of Democratic support in Congress.

Senator, in case you didn't realize it, "regular" people save money, too. It's a good thing. If we cut their taxes, and they saved more money, that would expand the pool of loanable funds and induce more investment spending in the economy. Instead, you are just singing the same old class-warfare tune. Warble away, as your audition isn't likely to last long.

Hood is president of the John Locke Foundation and publisher of Carolina Journal.


 



TOPICS: Business/Economy; Editorial; Extended News; News/Current Events; Politics/Elections; US: North Carolina
KEYWORDS: edwardswatch

1 posted on 01/08/2003 10:53:09 AM PST by Ragtime Cowgirl
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To: Howlin; Constitution Day; jern; PhiKapMom
FYI.
2 posted on 01/08/2003 10:57:46 AM PST by Ragtime Cowgirl
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To: Ragtime Cowgirl
Senator Edwards is distinguished amongst his colleagues as the Presidential candidate most likely to lose his home state in a general election if he were to win the DemoncRATs nomination.
3 posted on 01/08/2003 11:01:35 AM PST by Steven W.
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To: Ragtime Cowgirl
BTTT
4 posted on 01/08/2003 11:02:05 AM PST by Mr. K
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To: Ragtime Cowgirl
GREAT
ARTICLE!

Thanks, Ragtime Cowgirl.
5 posted on 01/08/2003 11:30:19 AM PST by Recovering_Democrat
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To: Ragtime Cowgirl
When Bush proposed the 2001 tax cuts the Rats derided it as worthless and "only $300, a muffler for your car". Now when THEY propose a ONE TIME gimme of $300 it is the beat all to end all.
6 posted on 01/08/2003 11:37:22 AM PST by Blood of Tyrants
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Comment #7 Removed by Moderator

To: Ragtime Cowgirl
It is interesting to me that Rich Dumbocrats always seem to be the ones saying that the rich wouldn't use a tax break to the benefit anyone but themselves. For example, the rich wouldn't really worry about job creation, they'd selfishly hoard their money and watch the poor starve. It makes me wonder--how many jobs did the former trial attorney created during the "great Clinton economy"? For that matter, how many jobs have the gods of the dumbocrats, Bill and Hillary, created? Perhaps the real reason these misguided souls trash Bush's stimulus plan is because they are really the greedy, self-centered demons that they try to make conservatives out to be...... hmmmmmmm.....
8 posted on 01/08/2003 11:40:25 AM PST by TnMomofTwo
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To: Ragtime Cowgirl
I have encountered the argument that when the government spends money, it stimulates the economy just as well as when citizens spend it. Argue a bit with a lib and you'll hear this.

The answer is:
Money is just a way to shuttle value between goods and services. When an individual or private business spends money on capital, you can be sure that the private person is spending (as they see it) in the most efficient way - otherwise, the private person or business will soon be without capital.
However, when the government spends it, there is no accountability (threats of loss or bankruptcy) and therefor the money will be spent inefficiently (in the economy as a whole).

9 posted on 01/08/2003 11:45:43 AM PST by MrB
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To: Ragtime Cowgirl
These dumb ass democrats will never get it. Its like once they are indoctrinated into the democratic party they also get a lobotomy and are incapable of independent thought. Keynes' theories are flawed but they really suit the democratic ideology. Wasn't Edwards largest contributer group trial lawyers ? This guy would be worse than the Klintons, a potential disaster again. Inside every democrat is a communist wanting to come out of the closet.
10 posted on 01/08/2003 11:48:41 AM PST by muslims=borg
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To: McNoggin
How about a real test. Can he name the assistant deputy finance minister of Tanzania and can he spell "potatoe".
11 posted on 01/08/2003 12:19:01 PM PST by ampat
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To: Recovering_Democrat
Yes it really is a

GREAT
ARTICLE!

12 posted on 01/08/2003 12:25:33 PM PST by trebb
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To: Ragtime Cowgirl
thanks for the great post!
13 posted on 01/08/2003 12:27:23 PM PST by ffusco (siempre raggione)
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To: *Edwards Watch
http://www.freerepublic.com/perl/bump-list
14 posted on 01/08/2003 12:34:39 PM PST by Free the USA
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To: Blood of Tyrants
Good point. I had forgotten about that.
15 posted on 01/08/2003 12:35:05 PM PST by PaulJ
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To: ampat
Can he recognize a bust of George Washington?
16 posted on 01/08/2003 12:37:30 PM PST by dfwgator
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To: Ragtime Cowgirl

17 posted on 01/08/2003 12:38:07 PM PST by Henchster
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To: muslims=borg
Edwards is worse than your normal democRAT communist, he's also a lawyer
18 posted on 01/08/2003 12:42:32 PM PST by sticker
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To: muslims=borg
The real problem is that most of the voters, and media whores, don't know the first thing about economics. There is no interest on the media's part to educate the voters, because the media supports the same dumb ideas the democrats do.

If the voters knew, or cared, maybe this stupidity would cease, but given who controls the schools and colleges, who do you think is going to educate (future) voters about reality? Ain't gonna happen!
19 posted on 01/08/2003 12:59:31 PM PST by bballbob
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To: bballbob
Maybe I was lucky but when I was in college we were heavily taught in the Austrian School of economic theory and Adam Smith. Keynes was merely a footnote and my Econ 101 teacher made fun of his theories. Many of these democrats who are proponents of Keynsian economics don't even know who Keynes was nevermind Adam Smith. Sad.....
20 posted on 01/08/2003 2:05:45 PM PST by muslims=borg
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To: Ragtime Cowgirl; JeanS
My Edwards folder is getting REALLY full and it's making me furious!
21 posted on 01/08/2003 7:12:21 PM PST by Howlin
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To: Ragtime Cowgirl
John Hood is a good writer. I always enjoy what he writes.
22 posted on 01/08/2003 7:28:31 PM PST by jern
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To: Howlin
My Edwards folder is getting REALLY full and it's making me furious!

Don't get mad, get even. (^;

The 2002 Fla. election gave me hope. Our local papers, TV news, AP and Gannett state news wires were so biased against Jeb and for (lawyer) McBride we stayed fighting mad all summer and up to election day. When the press exaggerated a poll or made up a new charge against Jeb, Fla. Freepers countered with the facts. We wrote letters to the editor, but most of all, we informed the people of Florida through e-mails to homeschooling organizations, church groups, business groups, taxpayer advocacy and tort reform groups, veterans' groups, etc., and these groups spread the word.

These same groups in NC and throughout the nation will help spread the word on Edwards. Perhaps we need to start with Iowa and move on, follow Johnny's own snake oil tour. Forewarned and all...

Floridians - even Dems. - saw through the press attacks and stood by their Governor. Let the press praise Edwards. Let Edwards criticize our CIC. The people aren't as "regular" (dumb) as they'd like to think....and we now have the internet.

23 posted on 01/09/2003 2:28:24 PM PST by Ragtime Cowgirl
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To: ampat
How about a real test. Can he name the assistant deputy finance minister of Tanzania

The deputy finance minister is Abdisalaam Issa Khatibu. I'll be durned if I can find the Deputy's name.

Did Edwards go to Tanzania? He climbed Kilimanjaro, right?

24 posted on 01/11/2003 10:47:07 AM PST by ChocolateDogs
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