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We are all Keynesians now, if you define ‘all’ as ‘< 12%.’

By: Moe Lane (Diary)  |  February 5th, 2010 at 06:00 PM  | 

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But no doubt the administration just needs to explain the situation better to the American people.

No doubt.

While influential 20th Century economist John Maynard Keynes would say it’s best to increase deficit spending in tough economic times, only 11% of American adults agree and think the nation needs to increase its deficit spending at this time. A new Rasmussen Reports national telephone survey finds that 70% disagree and say it would be better to cut the deficit.

In fact, 59% think Keynes had it backwards and that increasing the deficit at this time would hurt the economy rather than help.

To help the economy, most Americans (56%) believe that cutting the deficit is the way to go.

Hey! How about another speech? That might work.

Moe Lane

PS: This is a good excuse to post this.

Crossposted to Moe Lane.

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COMMENTS

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  • http://itsaboutfreedom.proboards.com/index.cgi IronDioPriest

    …when the specter of Keynesian policy has been revived has so much information been at the fingertips of the American people.

    Now, in this deep recession, the failures of this economic template is easily exposed for what it is, and people are getting the message. Not only that, but they intrinsically understand from managing their own finances just exactly how ridiculous it is to increase debt when the bottom is falling out of your ability to repay it.

    Thank God.

    Oh, and if the GOP blows this by failing to understand that fiscal conservatism has been newly and starkly redefined as the “center” of American politics, then a) America is doomed, because the GOP is the last hope of pulling us back from the permanent loss of liberty (God, it pains me to contemplate BOTH statements!), and b) the GOP will demonstrate that the party is broken and unfit to lead.

    So c’mon, GOP. Follow us.

  • neum432

    an ever larger percentage of Americans favor the security of a govt’ check twice a month over the freedom to attain that check due to their own skills and talents.

    The freedom bell needs to ring again. Freedom to fail means you will ultimately have the freedom to succeed. Obama represents the “what can Govt’ do for you crowd”!

    Leave me alone is what we should be saying!

  • vettepilot

    Who said the following?

    “”The theory of aggregate production… nevertheless can be much easier adapted to the conditions of a totalitarian state, than … under conditions of free competition and a large degree of laissez-faire.”

    The left loves to talk about spending on “infrastructure” projects without any understanding what-so-ever as to why that can be beneficial, as in the 50s, or a complete waste of money, as in…uhhh…pretty much ever since. Eisenhower’s deficit spending included the development of a national highway system that allowed for a paradigm shift in how goods and services moved around the country. The overall result was a huge boost in productivity and efficiency. Keynesian stimulus now equates to throwing money to fix things that already exists in order to create make-work projects.

    Eisenhower saw a problem, identified a solution, and then spent the piles of money to fix it. Statists see a (imaginary) pile of money, assume it’s the solution, and then go looking for a problem.

  • http://itsaboutfreedom.proboards.com/index.cgi IronDioPriest

    “Eisenhower saw a problem, identified a solution, and then spent the piles of money to fix it. Statists see a (imaginary) pile of money, assume it?s the solution, and then go looking for a problem.”

    Bravo!

  • Flagstaff

    an ever larger percentage of Americans favor the security of a govt? chec

    k

    To follow his logic, all would be fine if only we ALL worked for the government. Word is still to come as to who would pay taxes then, in order to make those paychecks good.

  • Flagstaff

    of The General Theory of Employment, Interest and Money, it was of course Keynes who said it.

    He was probably right. Under “conditions of free competition and a large degree of laissez-faire” his policies would be trashed before they could take hold, and if they did tke hold, his supporters would eventually be trashed as well. Under classic totalitarianism everything is controlled by the state, so Keynesian economics can be held in place until bankruptcy.

  • radcabasa

    Year 2000 we have a surplus. Year 2008 we have 10 trillion debt. Two questionable wars,that we were told would be 200 Billion or less and oil money would pay us back. Reality,over i trillion and counting. A 3 trillion tax cut that would stimulate the economy. Reality,richer upper class,poorer middle class and the biggest recession since the 1930′s. A medicare drug bill that would help seniors, Reality increasing drug prices,tremendous pharma and Insurance profits. A private medical program. Reality, increasing cost to over 2 trillion,loss of jobs and competition to other “single payer” countries, and millions of bankruptcies and 12% increase in cost per year. Biggest expanse of government in 40 years. Loss of tax revenue due to recession and tax cuts,increasing costs of the wars and defense spending especially.
    All of the above happened while Bush was President and Republicans were in power.
    Today,Sessions of Alabama is trying to blackmail his own government to reinstate a Defense Billions program in Alabama. A program that all Defense and military advisors say is not needed or wanted. Alabama is in the top 10 of states that get the most federal aid each year. This is one of the guys you want to cut the deficit?
    The deficit is the result of all actions by the same group of politicians that were in charge the last 8 years. They will try to rewrite their history and will blame Obama et al but will continue to create all the PORK they can for their supporters and donors.
    Over 2/3 0f the budget is off limits to any politician and the 1/3 left will be fought over to save all the earmarks,Federal programs etc. Demonize all you want, the whole system is the cause. Dysfunctional,selfish and unethical. This includes all the “born again” deficit hawks.

  • 6eorge Jetson
  • philbo

    We will never know what Keynesian economics would have looked like had the former stock broker not died in 1946, just after WWII. He also believed that the government should reduce its deficits when times are good so you could argue that what is being practiced by today’s socialists is not Keynesian economics.

    The problem with economic theory is that once ANY theory is adopted by politicians, they never get around to the “shrink the deficit” part. All economic theories lead to bigger governments and bigger deficits. Same thing happened to Hayek/Friedman economics under the big government GOP.

    Economic theory is nowhere as big a problem as corrupt politicians are.

  • philbo

    It seems to me that most people call anything that argues for more government spending and higher taxesas Keynesian economics. That is wrong. Keynes believed that the government’s role was to lop off the runaway bubbles when things were too good and temper the economic fallout of recessions when they weren’t so good and so create a more stable capitalistic economy. His aim was to create an equilibrium point featuring relatively high unemployment., high investment and low interest rates. It’s chronic unemployment that makes societies unstable.

    I am of the belief that were profligate deficit spending to be eliminated, there wouldn’t be that much difference between Keynesianism and Friedmanism.

  • Flagstaff

    Credit where it is due.

    Just too many other things going on.

  • OccamsRazor

    .

  • 6eorge Jetson

    while citing the Bush tax cuts. That takes quite the Statist goggles.

  • 6eorge Jetson

    Would you have preferred that Saddam’s murderous ways continued and that the 25 million Iraqis still be under his power?

    And would you have turned the other cheek on Afghanistan after 9/11? Even Obama campaigned in support of the Afghan war.

  • gekster
  • DONTREADONME

    is the fact that you use Government to control bubbles while using Government to bolster recessions. Unfortunately, the rule of thumb is Government must inheritantly be larger. To say that the GOP that made government larger was the Hayek/Friedman economics is incorrect since it could be said that the GOP went more towards Keynes philosophy and abandoned Hayek. I think Hayek would have been offended by the correlation you just made.

  • JoeG

    The federal highway system also brought the downfall of passenger and freight rail. That now has us exporting $700 billion a year to pay for the oil to run it all.

  • Martin Knight

    Second, I believe the Senator you’re talking about is Richard Shelby, not Jeff Sessions. And while he’s wrong in general, he’s primarily upset about a rushed $40b contract for Air Force refuelling tankers going to an European company.

    Third, if you’re really stupid or deluded enough to believe America is losing jobs to “single payer” countries when a Canadian Premier is currently in America for surgery. In fact, where are the numbers showing America losing jobs to single payer countries? How many Americans have left the States for jobs in Europe? Canada?

    Fourth, insurance and pharmaceutical companies’ profits are generally no more than 5% – even now. Compare that to Hollywood (e.g. Avatar alone is at 500%) and one wonders why the Left doesn’t demand windfall profits tax on the movie industry.

    Fifth, Obama didn’t propose and get a $787b “stimulus bill” to distribute to the UAW and expand public sector union membership rolls among others? And that has nothing to do with the deficit? Or are you actually blaming that on Bush (whose TARP program is actually returning money to the Treasury)?

    Sixth, where’s Fannie Mae and Freddie Mac in all this? You know, the two GSEs the Democrats went to the mat to defend, preventing multiple attempts by the Bush Admin. to audit and regulate them (including blocking legislation by McCain and Sununu), until they crashed and took the market down with them?

    Seventh, two “questionable” wars? For the past 8 years, every Democrat on TV, including Obama has been yelling at the top of their lungs that they were all in on Afghanistan … just like they claimed they supported the war in Iraq and voted for it. And now, it’s suddenly “questionable”? And where did anyone say the oil money would pay “us” back?

    Eight, you’re obviously a mendacious idiot. Or thoroughly ignorant. Neither are good though the latter can be helped.

  • philbo

    But I do know that Keynes was not in favor of permanent deficits nor of big government. His theories were only used to justify government intervention and the politicians never got around to the rest of it. Most of what we attribute to Keynesian economics evolved long after he did.

    Hayek/Friedman believed in small government and preferred tax cutting to spending increases and as the Laffer curve demonstrated, there IS an optimum tax rate than maximizes tax revenues. The error that Reagan made was assuming that if you kept cutting taxes, Congress would eventually be forced to reduce spending. It didn’t work. Congress, regardless of which party is in control, ALWAYS grows spending since it expands its power and influence.

    As to Hayek being offended by anything I would say, I doubt he would care what I think. If he did, well… talk about sensitive! I am absolutely positive that he would not appreciate his name being applied to the theories that led to what the GOP did in the 1980s and again in 1998-9.

    Same with Keynes. I am absolutely certain that “The Great Society” is NOT what he had in mind. I guess I would argue that properly practiced, Keynesian economics is fine but I would add the Laffer curve to curb taxes. The failure of both theories is not due to the theory itself but that in practice, politicians NEVER cut back spending.

    And by the way, Friedman also believed that there was no need to establish medical standards for doctors.

  • philbo

    His aim was to create an equilibrium point featuring relatively high EMPLOYMENT, high investment and low interest rates. It?s chronic unemployment that makes societies unstable.

    I have a very bad cold, haven’t slept all week and am getting psychotic.

  • conservativemusician

    As Rush addressed on his show today where the EU is now telling Greece to cut its debt load to a lower percentage of its GDP. It is so hypocritical that Obama whines about inheriting huge deficits from Bush, while at the same time he is running up the debt to stratospheric levels which will create higher baseline budgeting for years to come. Ironic that it might take a bunch of Chi-coms telling us to get our debt under control to finally get Obama’s attention to stop spending money and running up the national debt. Will he actually listen to likeminded communists thugs who do not have our best interests at heart, or, like he did when he fielded health care questions from the GOP at their recent retreat, will he stubbornly posit the ridiculous belief that he couldn’t find any competent economists to agree that cutting debt is fiscally responsible? Yep, he’s a real brainiac. Even my teenager has figured this one out.

    Great post Moe. Also loved the video. White men can’t jump, but they can rap :-) .

    Regards, CM

  • vettepilot

    Particularly that what passes as Keynesian today is a perversion of his original theories. But I would disagree with the argument that there would be little difference between the Monetarist/von Mises and Keynesian schools without deficits. As a matter of fact, what Hayek wrote in Road to Serfdom essentially laid out his argument against Keynesian policy, in that opening the door to any large scale government intervention would move the system one step closer to authoritarianism/totalitarianism. It’s hardly a coincidence that Road to Serfdom was published 8 years after Keynes’ work, and that Hayek makes several references to what was happening in the United States at the time (although much of it is focused on England/Germany). From my readings, it seems like Hayek actually leaves government a bit more latitude to act, while Friedman essentially believed that government should be limited to providing the legal framework and little more.

  • vettepilot

    So are you arguing that economic progress is a bad thing? Last time I checked, I didn’t see any railroad tracks stopping at the loading dock of my local grocery store. And FedEx sure as heck hasn’t dropped any packages at my house via CSX in the last several months… And I’m guessing you meant to say “importing” $700 billion instead of exporting. But even that argument is pretty thin, as that $700B has a) resulted in FAR greater economic value, and b) could easily be reduced if we would increase domestic production.

  • DONTREADONME

    its as clear as day! When you ask Government to control ups and downs of the economy then you are making a naive point that the Government can conduct these manipulations in an efficient and controlled manner. You are also expecting the Government to conduct itself ethically or in a manner that guarantees fair play and when I say fair play I mean setting the rules not manipulating the game. Keynes formula expects a Government to conduct itself in an ideal manner which in practice is unrealistic.

    To make sure you understand my point, to allow Government to control economic cycles is by its definition requiring big Government because the net result is BIG GOVERNMENT.

  • DONTREADONME

    while I do not disagree with the spirit in which the Keynes vision was to be applied, I am saying that in practice his theory is disastrous because it fails to account for government’s nature. I guess the same could be said for Hayek or Friedman, but I have found that watching a Government work first hand on a daily basis, yikes! If it is as you say, then like the steady-state theory, Keynesian economics is a good theory on paper, or it has been perverted by the many followers that have come since to bastardize his thoughts. Anyway, I wasn’t looking to argue only to discuss

  • http://moelane.com/ Moe Lane

    Pete Sessions is a *Congressman* from *Texas*.

    Jeebus, they must be demoralized. They can’t even bother to keep straight who the heck they’re supposed to be hating this Three Minutes.

  • http://pocketchangeproductions.net/ anotherindyfilmguy

    If only the O would get it… but then he’d probably do the opposite of what is long term good in the name of “humbling America”…

  • Martin Knight

    He’s still wrong though.

  • Leopard1996

    That doesn’t take into account the microeconomics of individuals maximizing their own utility through any possible channels in other words, It would work if all politicians were robots or had nothing to gain from the power that they possess, but since politicians who control those levers do have a lot to lose (their jobs, possible political contributions, possible placements after their political career is over with), the decisions that they make more or less likely will be for their own benefit and not for the benefit of the overall Macroeconomy.

  • http://impudent.blognation.us/blog kyle8

    Well not the original theory. The original theory was that governments should run a surplus in good times and then spend the surplus in bad times. That might be economically feasible. ‘

    But Keynes modified his theory and supported deficits. It is really a stupid theory on the face of it because everyone with any sense knows that governments are inherently more inefficient in the allocation of resources than the private sector. It also creates economic uncertainty which prolongs a recession.

    Therefore what you are doing is borrowing money, paying interest, using the money in an inefficient manner, usually for unimportant projects and then expecting the results to be better than if the money stayed in the private sector.

    Even if it is borrowed money the debtt has an immediate impact on the markets because everyone knows there will have to be either more taxes or inflation in the future, it also crowds out private borrowing.

    Simply put, you have to be a goddamn idiot to believe that you can tax, borrow, and spend yourself into prosperity.

  • Leopard1996

    That video should be played to any Econ 101 class in High School or College. It reminded me of my econ teachers in college, starting with Keynes and then after that coverage was over stating emphatically, “Now I am going to show you why that is B.S.” Proceeding directly to Adam Smith, and Milton Friedman.

  • Leopard1996

    My thinking on making that statement, was to shoot at least a .22 size hole through anyone who believes the Keynesian model works. Just in my limited study of economics, and public finance (which was one class in college), politicians always got to worry about that median voter if their utility is maximized by keeping their jobs, hence what may have been called for in a Keynsian model (like running up surpluses in boom years, to be able to stimulate in the bad years), won’t fly if that median voter believes that your cut in the boom years is going to adversely affect them after getting some preceived benefit in the preceiding bust period.

    I do believe you statement zeroed in on my .22 hole, and took a .45 hole to make the hole in the whole Kenysian model that much bigger.

  • http://impudent.blognation.us/blog kyle8

    But after he was tapped by both the British government and FDR for advice he became seduced and modified his theory into supporting all sorts of deficit financing and specious government meddling in the economy. So I am not keen to make any excuses for him, he was a purveyor of noxious ideas.

  • lukematthews

    Too bad the only people actually watching it will probably be the ones who already understand the underlying dilemma. I agree it should be shown in Econ 101 classes, however, the socialists I had for professors would have just insulted Hayek and left it at that.

  • Spartan4Life

    The first on Communism:

    “How can I accept the Communist doctrine, which sets up as its bible, above and beyond criticism, an obsolete textbook which I know not only to be scientifically erroneous but without interest or application to the modern world? How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeoisie and the intelligentsia, who with all their faults, are the quality of life and surely carry the seeds of all human achievement? Even if we need a religion, how can we find it in the turbid rubbish of the red bookshop? It is hard for an educated, decent, intelligent son of Western Europe to find his ideals here, unless he has first suffered some strange and horrid process of conversion which has changed all his values. ?

    So he may not have much cared for Communism but he sure as hell was an elitist that believed only the “intelligentsia…..carry the seeds of all human achievement”. Guessing he would have been right at home in Obama’s Cabinet.

    I like when he acknowledges that his ideas were only that, ideas, as follows:

    “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back? soon or late, it is ideas, not vested interests, which are dangerous for good or evil. ?

    So true, John boy. We are now the slaves of a defunct economist.

  • Spartan4Life

    They are a zero sum game.

    While one person, the one with the job, benefits, someone else is hindered, that is, the shlub taxpayer who has to pay for it.

    Now I understand that there are vital services that are for the common good such as police, fire, and water utilities. But do we really need 2.2 million Federal government employees, many of whom are just paper pushers? I really believe our states would not be in such bad shape if it wasn’t for the black hole in Washington, DC sucking up our resources. Think about how much Federal tax you pay compared to state and local tax and who is doing what that you really care about.

    I say throw all those bums out. And say “Hell, no!” to a bunch of make work SEIU government jobs.

  • Flagstaff

    learn how to delineate paragraphs. Anything to make that stuff more readable. Who knows, you might even have a cogent point somewhere in that mess.

    re: “Year 2000 we have a surplus. Year 2008 we have 10 trillion debt. Two questionable wars”

    I think I know what you’re getting at, but the facts are that the Bush years included the expenses of recovering from the bubble recession that HE inherited from Clinton and fighting ONE war on FOUR fronts, a war that was forced on us by al Qaida–there was nothing optional about it. Only a fool would expect that all to be accomplished without some cost, yet the highest Bush deficit was less than $200 billion until his final year. That one was higher because of the TARP bailout, which may have been necessary (we won’t really know for several to many years) and which is in the process of being repaid. Of course, Obama wants to turn that money around and spend it on his Porkulus II package, rather than use the proceeds to pay down our national debt, as the enabling legislation requires.

    Over 2/3 0f the budget is off limits to any politician and the 1/3 left will be fought over to save all the earmarks,Federal programs etc. Demonize all you want, the whole system is the cause.

    I suggest that the system is not the cause, but it has been systematically subverted by Progressives over 100 years of drip, drip, torrent, drip so that it’s highly resistant to the corrective measures that would fix it. If you disagree, consider this: Any rational observer can see that the Social Security System is on the verge of collapse. Yet, when Presidents of the past, including George W. Bush, attempted to make changes to fundamentally change the SSS into something more self-supporting, the howls from the Left (and even the Right, sometimes, for different reasons) were loud and incessant enough to defeat anything that will improve the SSS. All that can pass muster seems to be changes that make things worse, not better.

    How can that be? Because the government has been transformed from an institution that protects our liberty to one that provides us with too many of our necessities, such as Social Security, and the press has been transformed from a watchdog against government excesses to a cheerleader for the Progressive extension of government into new areas of largess.

  • Flagstaff

    and the guy is gone.

    Was it something he said? (^:^)

  • Richard Mullins

    So he was going to be a ghost sooner or later. He really did it to himself but that’s the way leftist do here when they pop off.

  • Flagstaff

    and by productive I mean work that will benefit the country in the long run (maybe the short run would suffice), a government job is part of the problem, not part of the solution.

    In general, it would be better for the country for those unproductive government workers to become unemployed there, because most of them eventually would become employed in productive work in the private sector.

    Suggested reading: A Conflict of Visions by Thomas Sowell.

  • http://dreamsfrommyforefathers.com RoguePolitics

    In addition to whatever damage it may have done to rail it also killed whatever impetus most would feel about moving to an aircraft. Everybody might be flying in Jetson mobiles. What about that economic development?

    Government funded rural electrification did the same for windpower, hydropower and later solar. Before rural electrification the beginnings of windpower were being installed across the country. Now we are looking to move that way at great expense. What would windpower cost today if rural electrification had never happened? A robust market would have existed for 70 years absent this interference in the market.

    I am not saying the interstate system was a bad idea. Just saying you don’t know what the market would have done to overcome the deficit of no interstate system.
    Privately funded toll roads for example may have solved the problem. And the roads would be built efficiently instead of becoming a poster child for government waste. Private companies would set speed limits with customer input instead of government bureaucrats designing them to create the maximum revenue stream.

    Private aircraft might have become ubiquitous.

    Markets respond to pressure points and if interstate travel or cargo hauling had created sufficient pain, private capital would have solved the problem.

    The invisible hand beats the heavy hand everytime.
    It is why the heavy hand works so hard to pervert, distort and misrepresent, or better yet ignore, the efficiency of the invisible hand.

    Great video Moe.

  • JoeG

    Both the delivery to the store and the delivery to your house are examples of local deliveries. Those deliveries would happen by truck whether the interstate highway existed or not.

    By massively subsidizing transport by truck we have highly distorted against a lower total cost and a far more energy efficient system.

    We are free market capitalists, and the interstate highway system is not the free market.