This will be the face of the GOP until the RINOs and lite 'Rats are flushed
out of the Party machinery once and for all, and that means
NO MORE BUSHES!
Posted on 01/15/2009 8:05:44 AM PST by ikeonic
Turning Keynesian economics on its head
By Ikeonic
For decades, John Maynard Keynes' policies have been used with arguable success to moderate the effects of the bust part of the bust/boom cycle. It's a very simple concept. When individuals and business stop spending and afraid to invest, the government is the only party left that can spend money to create jobs and get the economy moving again.
Time Magazine famously declared in December 1965, "We Are All Keynesians Now". In lauding the accomplishment of applying Keynesian policies, Time said:
In Washington the men who formulate the nation's economic policies have used Keynesian principles not only to avoid the violent cycles of prewar days but to produce a phenomenal economic growth and to achieve remarkably stable prices. In 1965 they skillfully applied Keynes's ideas—together with a number of their own invention—to lift the nation through the fifth, and best, consecutive year of the most sizable, prolonged and widely distributed prosperity in history.
Well, if only Time could have predicted how the next 20 years turned out. Guess they were too busy predicting the next ice age. Unemployment began a slow rise from 1966 to 1983 before finally topping out around 11% during the Volcker recession in 1982-83.
More from that Time article:
Says Budget Director Charles L. Schultze: "We can't prevent every little wiggle in the economic cycle, but we now can prevent a major slide." A slide, of course, is not what the U.S. Government's economic managers have been worrying about in 1965; they have been pursuing a strongly expansionist policy.
The chief cause of the economic malaise after 1965 was Lyndon Baines Johnson. LBJ couldn't manage prosperity as Eisenhower and Kennedy had done and he spent like a drunken sailor on his Great Society and his one arm tied behind the back boondoggle in Vietnam. The results were predictably catastrophic. In a somewhat similar fashion, George W. Bush failed miserably to rein in spending, save and pay down debt.
Things may be bigger and better in Texas but that is not what the economy needs from the federal government during times of economic prosperity. Both Texans' tenures should be textbook examples of how government can run the economy into the ditch. Time even linked Bush and LBJ together in 2007 by sarcastically saying "on the whole, [the Bush Administration] has been the most spendthrift Administration since Lyndon Johnson's". You don't say!
More from Time:
The man whose counsel will carry the most weight with Lyndon Johnson and who must make the delicate decisions in the next few weeks is the President's quiet, effective and Keynesian-minded chief economic strategist, Gardner Ackley. "We're learning to live with prosperity," says Ackley, "and frankly, we don't know as much about managing prosperity as getting there."
Keynesians like Paul Krugman are correct in asserting (much as it pains me to agree with anything Krugman says) that fiscal policy can speed economic recovery (preventing that "major slide") when private investment is insufficient or lacking. Most Keynesians are Democrats because Democrats have no problem spending money to stimulate the economy and FDR was the first President who first implemented Keynesian theories. The Democrats are the party best suited to implement Keynesian fiscal stimulus because they are the party who spends, spends, spends. I will grant them that.
However, what isn't clear to me is that the Democrats, particularly liberals like Obama, get that during boom times, Keynes essentially argued for the inverse of his prescription for recessions. If borrowing and spending are required during busts to get the economy moving, then surely saving, paying down debt and reining in government spending would be required during boom times to keep the economy from overheating and imploding.
Republicans failed during the last eight years to be fiscally conservative. We are supposed to be the party that knows how to manage prosperity! Instead of save, save, save we were the party that spends slightly less than the Democrats and finances it all by borrowing. See why we lost in the 2008 elections?
If the GOP had saved, payed off debt and cut spending during the boom times, we wouldn't be in the mess we're in now. But as the Time article makes painfully clear, we humans have only learned to celebrate fixing the mess and haven't learned too well how to avoid creating the mess in the first place. We celebrate the diet that sheds the unwanted pounds but don't celebrate keeping the weight off in the first place.
We've had a fire fighting mentality instead of a Smokey Bear mentality. Only Republicans can prevent forest fires and instead George Bush laid the groundwork for a massive fire by borrowing and spending the nation's treasury like a drunken college student on an all night binge using Daddy's credit card at every strip club for his bachelor party. We've just woken up to discover we've got a very, very big hangover and a big bill to show for it that sooner or later we must pay. Daddy is not a happy camper.
Back to Keynes. As much as we learned from Keynes, we never quite learned to manage the prosperity. So I support the current administration's efforts to right the economic ship in the short run while I may disagree with Obama on where and what we should invest that stimulus spending. Let's get out of the ditch first and then we can argue about who should drive and how to get there.
When the economy recovers, which party is best suited to take the helm? In times of prosperity, which party is most likely to save, pay down debt and cut government spending? Which party has promised an ever expanding welfare state?
When times are good and the economy is rolling, people look to the Republicans to be that party to hold the line on spending, save and pay down debt. To win back the trust of the people, we must be the party that not only champions fiscal conservatism but proves it by our deeds. We must prevent fires, not provide the fuel that starts the next fire. We need Smokey Bear, not Fire Marshall Bill.
To win back the White House and Congress, Republicans would do well to heed the wisdom of the GOP of the 1950s, which rode Ike's coattails on the message of reform, fiscal conservatism and living within our means. You see, Ike was the last Republican who for eight years saved, paid down debt and kept spending in check, even as the Cold War simmered. He should have and could have done more (Goldwater and Taft attacked Ike frequently) but compared to Bush, Ike looks the author of the Tightwad Gazette.
One more reason I'm an Eisenhower Republican...
Ikeonic, is a Dwight D. Eisenhower Republican, a Catholic conservative and has no tolerance for fair weather Susan Eisenhower Republicans. Please visit him at modernconservative.com.
Mr. Bill.
Fire Marshall Bill.
burnt toast.
There in lies the problem, no one will believe one word they say. First I want to see what they are willing to do about the mess they have made the past 14 years.
I am thinking to myself that I don't have a the first idea how to stop a forest fire from happening. And I am only one person, how can I alone perform such a huge task? So, I am thinking that there may be a volunteer Fireman out there that would be willing to do this job. I aint been paid one nickle too. So, the pay aint great, but I am sure you can do a better job then me.
So, do us all a favor and step up for the good of all the forest. Make Smokey proud and please take this responsibility from me.
Thanks!
So you’re a keynsian too, Well how about lowering taxes, cutting regulation (to stimulate business), ending the Fed dominated (cartel-monopoly) banking, and monetary systems, letting loose the free-market! The government increasing spending in this time will ONLY make things worse, not better in the long run (and weaken our dollar), HYPERINFLATION (think the tune California) here WE come..!
In the long run, you are correct. I’m not a Keynesian, but I do think there is a lot of wisdom in his theories. Democrats hear his theories and only hear “license for deficit spending during recessions” and Republicans have been failing to be the party that does the opposite. It’s kinda like on Seinfeld when George walks up one day and discovers that he should be doing the opposite of his every instinct. When the GOP starts acting like the opposite of the Democrats and plays the role of Smokey Bear instead of Fire Marshall Bill, I’ll be a happy camper. For now, I’ll just stick with the team until we get a coach who knows what the **** he’s doing. Bush is our Charlie Weiss. Bring back the Gipper.
Well I more lean toward Rothbard, Mises and the Austrian School, but I guess that’s something we can disagree on (I don’t feel like arguing about it now), Though IMO Keynsianism is what got us into this mess in the first place. Anyway I agree that we need to form a STRONG opposition!
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