Free Republic

A rift has emerged within the Democratic Party between liberal economists, who generally view the 2009 stimulus package as a success and say that Keynesian economics should remain the heart of the party’s economic policy, and elected officials, who in growing numbers have shunned affiliation with the $787 billion effort and are expressing doubts about the effectiveness of fiscal intervention. For decades, Keynesian policies, which call for government spending to make up for the shortfall in private-sector demand during an economic downturn, have been a central element of the Democratic tool kit and a principle of the party’s identity. But...

The U.S. economy is being slowly but surely destroyed and many Americans have no idea that it is happening. That is at least partially due to the fact that most financial news is entirely focused on the short-term. Whenever a key economic statistic goes up the financial markets surge and analysts rejoice. Whenever a key economic statistic goes down the financial markets decline and analysts speak of the potential for a "double-dip" recession. You could literally get whiplash as you watch the financial ping pong ball bounce back and forth between good news and bad news. But focusing on short-term...

And we know that Keynes’ medicine — spend ‘til a nation is even more broke than it was at the start of the Depression — wouldn’t go over well with the American people during 1932, since it wasn’t a part of Roosevelt’s platform. FDR, to listen to him, seemed most concerned with ending Prohibition, and far from promoting massive Make Work Projects, in some ways, ran to the right of Herbert Hoover. But thanks to almost three quarters of a century worth of self-perpetuated myths, today’s liberals actually couldn’t wait for the 21st century economy to collapse before literally promising...

As they used to say on Sesame Street, "One of these things is not like the others, one of these things is not the same." The current recession "is not like the others." At 33 months it is already more than three times longer than the average length of the other ten recessions we've had since WWII. There are no clear signs it will be ending anytime soon. Glimmers of a recovery appear from time to time, but most indicators remain depressed and many are worsening. On balance, the outlook is more negative than positive. Not since the Great Depression...

Ferguson: Overwhelming US Crisis Looms Monday, July 26, 2010 09:41 AM By: Julie Crawshaw Economic historian Niall Ferguson says Keynesian economists are stuck in the 1930s, completely unaware that a US debt crisis could come quite suddenly. “All it takes is one piece of bad news — a credit rating downgrade, for example — to trigger a sell-off,” Ferguson writes in the Financial Times. “And it is not just inflation that bond investors fear. Foreign holders of US debt — and they account for 47 percent of federal debt in public hands — worry about some kind of future default.”...

Abstract In this essay, I argue that neither non-economist bloggers, nor economists who portray economics —especially macroeconomic policy— as a simple enterprise with clear conclusions, are likely to contibute any insight to discussion of economics and, as a result, should be ignored by an open-minded lay public. The following is a letter to open-minded consumers of the economics blogosphere. In the wake of the recent financial crisis, bloggers seem unable to resist commentating routinely about economic events. It may always have been thus, but in recent times, the manifold dimensions of the financial crisis and associated recession have given fillip...

Paul Krugman is known for throwing a bomb or two from his platform in the New York Times, but it's really tough to take him for a violent fellow. In his July 2 blog post, "I'm Gonna Haul Out The Next Guy Who Calls Me ‘Crude' And Punch Him In the Kisser," Krugman lamented criticism of his support for more stimulus spending. A July 1 editorial in The Economist noted that the economy needs more private spending, not more government spending. "Mr Krugman's crude Keynesianism underplays the link between firms' and households' behaviour and their expectations of future tax and...

(June 30) -- With the country fixated on the adventures of Gen. Stanley McChrystal and the BP spill, it's understandable that last week's most depressing news might have passed a few people by: The U.S. Senate is intent on extending America's economic misery. Led by all its Republican members and Democrat Ben Nelson of Nebraska, the Senate is filibustering a bill that includes, among other things, emergency jobless benefits. As a result, 1.2 million Americans have seen their checks cut off since June 2, a figure that could rise to 2 million over the next week. Failure to pass this...

"Irresponsible" refers to Congress and the Obama administration - and here's why. For thousands of years, businesses, organizations, governments and even individuals have relied on a basic tool to make sure they do not spend or borrow more than they can service - it is called a budget. Yet, for the first time since 1974, when the current rules were put into effect, the U.S. House of Representatives does not intend to pass a budget resolution. The main purpose of the budget resolution is to set discretionary spending caps for the coming fiscal year. Without a budget resolution, members of...

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 foreclosure crisis that continues to grip our courts in 2010 and that will only get worse in years to come all began in 2005, 2006, 2007, when the mortgage industry and Wall Street colluded with each other to engineer the largest financial fraud in modern history. The facts are simple. Wall Street Wizards figured out a way to monetize then trade billions of dollars in wealth when they figured out how to convert mortgages into currency. Dollars and stocks were regulated, but because mortgages were new currency, they were totally unregulated, unsupervised and completely subject to manipulation. The biggest...

Get Ready To Taste The Bitter Side Of Keynesian EconomicsMichael Snyder May. 16, 2010, 9:48 AM Most Americans have no idea what the term "Keynesian economics" means, but the truth is that it has been deeply influencing U.S. economic policy for decades. Essentially, it is an economic theory that originated with a 20th century British economist named John Maynard Keynes, and it advocates government intervention in the economy in order to smooth out economic cycles. The general idea was that lower interest rates and increased government spending could be used to increase aggregate demand when the economy was experiencing a...

Feb. 28, 2010, 8:19 p.m. EST China's manufacturing growth slows in February By V. Phani Kumar HONG KONG (MarketWatch) -- One of two Chinese purchasing managers' indexes unexpectedly eased to 52.0 in February from 55.8 in the previous month, indicating a slowdown in manufacturing growth, according to data released Monday by the China Federation of Logistics and Purchasing.

Below are charts from the Heritage Foundation. The first one shows how federal spending is growing faster than federal revenue. Since 1965, federal tax revenues have increased by more than $1.5 trillion and spending by $3.3 trillion. In 2009, federal revenue dropped while federal spending increased by over $1 trillion. This is unsustainable. Somewhere somehow, you reap what you sow. The Piper needs to be paid.

In 2008, as the U.S. economy teetered under the weight of years of reckless credit expansion, the Bush administration decided against proposals to sweep out the bad debts from the banking system and then fix the regulatory structure—an approach based on tried and tested models from the S&L crisis and other financial crises. We will pay the price for this decision in 2010. That's because the Obama administration and the Federal Reserve are plowing forward with Plan B: Nationalize credit creation and "stimulate" the private sector by spending in its stead.

By the end of the year, the federal government may have totally restructured the American healthcare system. This health-insurance industry takeover may lead to widespread taxpayer subsidies for elective abortion. A new national energy tax may be imposed to reduce carbon emissions. The secret ballot for union organization may be effectively eliminated, swelling Big Labor’s ranks and coffers. Or maybe none of these things will have happened. Hard as it may be to believe, that last prospect looks most likely. It is a real possibility that none of these major legislative items—all considered inevitable after the Democratic victories of 2006...

Reagan-like faith in efficient markets set the stage for the financial meltdown. Great crises have a way of reminding us that acting as though we know perfectly well what the future holds almost always leads to disaster. That's especially true in economics, which tends to underscore the murkiness of the real world by dealing out surprises one after another -- booms, crashes, bubbles, you name it. It's fitting, therefore, that the recent economic meltdown has begun to restore that great apostle of uncertainty, John Maynard Keynes, to his rightful position of influence in economic thought. "Keynes asked why financial markets...

A global economy, energized by technological change and unprecedented flows of people and money, collapses in the wake of a terrorist attack .... The year is 1914. Worldwide war results, exhausting the resources of the great powers and convincing many that the economic system itself is to blame. From the ashes of the catastrophe, an intellectual and political struggle ignites between the powers of government and the forces of the marketplace, each determined to reinvent the world's economic order. Two individuals emerge whose ideas, shaped by very different experiences, will inform this debate and carry it forward. One is a...

Seeking 'not to let a crisis go to waste', left-leaning politicians and old-style Keynesian economists want to remedy the alleged failure of capitalism with a rising tide of big government. Let the budget deficits rip, empower the unions, socialise healthcare, increase trade protection, go green, and socialise the financial and industrial base. The irony, as Charles Rowley and Nathanael Smith show in this timely monograph, is that the Keynesian policy prescriptions that are serving as the pretext for this programme have already been tried. Expansionary fiscal and monetary policies by the Bush administration and the Greenspan Fed were implemented to...

“Everyone was convinced that there had to be a change. The DPJ will form the Government but we will not be arrogant and we will lead according to the will of the people.” The DPJ promises free secondary education, free treatment and delivery for expectant mothers, and an annual allowance of 312,000 yen (£2,000) to all children until they leave junior school. There will be a crackdown on the practice known as amakudari — “descent from the heavens” — whereby retiring civil servants secure jobs in the industries that they formerly supervised. “Japan now needs to make a clear shift...