Posted on 09/15/2010 5:21:25 PM PDT by Kaslin
Dana Milbank, a new Washington Post columnist, thinks Republican politicians "managed to turn the Keynesian notion of economic 'stimulus' into such a dirty word that President Obama and his aides are afraid to let it escape their lips."
He blames "think tanks such as the Cato Institute" for not agreeing that Keynesian theory is so "unassailable" and "universally embraced" that daring to question the elixir of deficit spending "has a flat earth feel to it."
Milbank forgets that Keynesian Democrats, including the recently departed OMB director Peter Orszag, constantly hectored Republicans about the evils of budget deficits while Reagan or Bush was in office.
UC Berkeley economist Brad DeLong wrote a 2004 paper for the Center for American Progress assailing Bush's budget deficit. "A bigger deficit means less investment in America," he wrote; "And less investment in America means slower economic growth." DeLong quoted Bush adviser Greg Mankiw who likewise argued that, "government budget deficits reduce the economy's growth rate."
Milbank now claims Mankiw supports the exact opposite idea — namely, that budget deficits "stimulate" the economy's growth rate. Unfortunately, any theory that explains everything must also explain nothing.
(Excerpt) Read more at investors.com ...
everyone over the age of fifteen knows that too much stimulation can just be annoying. You won’t get anything done without getting to real work. Just saying.
Stimulus 1. was never a stimulus, it was political payback
to unions and liberal special interest groups as well as
liberal politicians.
I have seen lots of young people on forums that think that FDR prevented a great depression and that we need to spend the same way to prevent another. Keynesianism is such a self justifying thing because it can fail over and over and they just say it prevented something worse and should be done even bigger.
Japan’s been stimulating their economy every year since 1989 on a far grander scale than has the U.S., and Japan is stuck with 21 years of deflation...and counting.
http://online.wsj.com/article/SB123249646698200289.html
In normal recessions — the argument goes — an increase in discretionary government spending is unnecessary and even counterproductive. But in the event that a recession becomes a depression, a Keynesian stimulus package might work.
Keynes was a goofball. His footprint in history is a pox.
It is quite well understood. It works when there is a monetary depression - an economic slowdown cause by a decrease of the quantity of money in circulation (because of a sharp credit contraction, etc.) It does not fix structural problems caused by many years of investment in unproductive assets (shopping malls and Miami condos, regulatory apparatus and lawyers to run it, etc.) where ultimately the lack of productivity resulting from a long stream of diverted income to these things begins to feed back on total economic activity as they undermine useful economic activity and produce nothing useful themselves.
The liquidation of such malinvestment is a key part of any economic cycle. It is painful but necessary. It recycles resources and labor into productive assets.
In this latter instance, the Keynesian stimulus just sustains and increases the malinvestment differing the day of reckoning until a day when the adjustment will be even more painful.
Thanks for elaborating on that, I’d wish the Republican party could understand that and use it to show how economically inept Democrats are
In 1939, after 10 years of Keynesian economics on steroids, the unemployment rate was still stuck at 17%.
And the Democrats think THAT was a marvelous success. The only reason it came down after that was because the US government drafted 13 million men into military service, beginning with the Selective Service Act of 1940.
As for “the war getting us out of the Depression,” life for the average American in the war years was even WORSE than the thirties, the only difference was that it was considered highly unpatriotic to complain.
The tax cuts of the late forties is what got us rolling again.
There is so far, no such thing as a Keynesian success story.
And if the stimulus had any chance of working, the money would HAVE to been spent in the U.S. on meaningful projects. Sending $800,000 plus to Africa to show uncircumcised men how to wash their genitals as recently reported, is beyond bizarre.
In someones book, that probably qualifies you as a racist.
The Somalia's who immigrate here have to be taught how to use a door and the bathroom, then they go on welfare paid for by you and me.
We're doomed!!
“Ain’t everybody talking about Heaven gonna go there.”
Ain’t everybody taking about Keynes know what they’re talking about. Keynesian theory admits that “leakages” can undermine a stimulus. Leakages = stimuli in a country that is a heavy importer and is heavily in debt.
“In 1939, after 10 years of Keynesian economics on steroids, the unemployment rate was still stuck at 17%.”
The “Keynes on steroids” spending that you allude to was actually very small by post WWII standards. In the post-war era government spending has been about 20% of the economy. During the Depression it was less than 10% of GNP. That amount of spending seemed high at the time simply because it was a much larger portion of the GNP than it had been during the 1920s, when government spending was as low as 5% of the economy.
http://www.econlib.org/library/Enc1/GovernmentSpending.html
“There is so far, no such thing as a Keynesian success story”
There have been plenty. Tax cuts are one type of Keynesian policy response to a faltering economy. Keynesian policies work fine to reverse normal cyclical recessions. They aren’t going to work in structural deflations like we now have. The big problem with Keynesianism isn’t that it doesn’t work, it’s that it grants too much control and power to the political class.
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