Selling Keynesian Economics to Joe the Plumber?
I Think Not
I usually don’t respond to Bloomberg, but one of my writers saw some low hanging fruit especially when someone tries to peddle Keynesian economics.
Yesterday Bloomberg published an article by Christopher Flavelle entitled “Selling Keynesian Economics to Joe the Plumber”. I suspect that the author doesn’t know what a big sale that would be. Joe’s too smart for that. Remember this: we can either have equality or liberty but not both.
A while ago I posted an article briefly explaining Keynesian economics. You might want to read it again, here. At least watch the hilarious 2 minute video of Obama supporters confusing “Keynesian” with “Kenyan”. In that article I mentioned Keynes’ discussion of the multiplier effect of government spending. This is what Flavelle was talking about in his article yesterday when he said that government stimulus makes sense if it provides money to lower-income people, as those people will be more likely to spend most of it.
Flavelle’s article shows that he has drunk the leftie Kool-aid and is willing to accept certain things as facts without any supporting evidence. For example, the article begins with this question: “What explains Washington’s continuing aversion to fiscal stimulus, despite mounting evidence that reduced government spending is hurting the nascent economic recovery?” First of all, THERE HAS NOT BEEN A SIGNIFICANT DECREASE IN GOVERNMENT SPENDING!
Total federal spending for fiscal year (FY) ended 9/30/12 was $3.56 trillion, while total federal spending for FY 2011 was $3.67 trillion, a decrease of 2.8%. Look at how much lower revenue is compared to spending on the graph. Shouldn’t we at least ATTEMPT to balance the budget?
Secondly, what “mounting evidence” does Flavelle have that this reduced spending is hurting the economic recovery? Is he talking about the cancelled white house tours, the flight delays, or what? Waiting for evidence…..**crickets chirping**.
Flavelle also states that “…there is no logical, economically literate reason to oppose greater federal spending…” What? Take a look at the graph above. Revenues are less than spending. Even someone in love with huge government should know that we can’t keep this up forever. But this person will likely just say “tax the rich”. The 2012 deficit (the gap between revenue and spending) was $1.13 trillion. The most recent report from taxfoundation.org (based on 2009 data, the most current data the foundation has from the IRS) shows income taxes collected from the top 25% of earners was $756 billion. To bridge the 2012 deficit we would have needed to increase taxes on the top 25% of earners by 150% (i.e. they would need to pay 2 ½ times as much as they pay now). I’m fudging a bit because I don’t have the 2012 tax data, but you get the idea.
Flavelle says that Keynesians will correctly argue that stimulus isn’t a social program, that it is designed to benefit all of us. He is so wrong. Keynesian economics is ALL ABOUT wealth redistribution. Take money from the successful and give it to…all of us? Nope. Keynes believed in the multiplier effect, so he thought it would be better to give the money to the poor as they would spend more of it. The problem is that we do not have any evidence that this works. How is Greece doing with its excessive social programs? Europe? **chirp, chirp**
Did the nearly $1 trillion in stimulus 2009 help the economic recovery? Check out this chart from businessinsider.com. This chart shows the path of jobs decline since the beginning of various recessions (each colored line represents a different recession). The red line is the recession that started in 2007. The 2009 stimulus did not keep this from being the worst job-recovery recessions ever.
The most telling thing in Flavelle’s article is that he holds a belief many apparently do. He mentions Pew Research Center’s 2012 American Values Survey that showed 59% of respondents believed it is government’s responsibility to take care of those that cannot take care of themselves. I do NOT believe that, and I’m saddened that this has crept into our culture. Americans are the most generous people in the world, and WE can take care of those in need. We can do it better than the government can.
Flavelle even notes that those who oppose stimulus spending may “simply hold a different view of the government’s proper role in society. BINGO. That’s the whole point. The liberals believe in the nanny state, cradle to grave care, a la The Life of Julia video of the Obama campaign. And Flavelle is definitely a liberal! In addition to writing for Bloomberg, he writes for ProPublica.org, the organization that was the recipient of the leaked 501(c)(4) applications of some tea party groups.
Here’s the difference between the liberals and those of us more interested in liberty: They want “free stuff” and we want liberty. You cannot have both. In order to distribute “free stuff” the government must take money from someone. The left often complains about “income inequality”, but do we really want “income equality”? Everyone earns the same amount regardless of the job held, effort expended, training required for the job, or maybe even danger faced in the job? It sounds ridiculous to me. I’ll take liberty over equality every day.
So, sorry Christopher Flavelle. No sale.
Follow Gail on Twitter: @AcctgProfTX