Debating Keynesian Economics with Robert Reich on CNN

Townhall.com ^ | June 14, 2012 | Daniel J. Mitchell

[Kaslin]

It seems that any argument about the economy eventually boils down to the core issue of whether government spending acts as a stimulus or whether it is – in the words of Thomas Sowell – a sedative that undermines prosperity.

So when Robert Reich and I went on Erin Burnett’s CNN show to discuss Obama’s stumbling economic performance, much of our discussion focused on whether to further expand the burden of the public sector.

Dan Mitchell Debating Keynesianism with Robert Reich on CNN

Here are a couple of observations about the interview.

1. Reich admitted that spending is a problem and in the “long term” needs to be reduced. I suspect “long term” never arrives in Reich’s world, but this is nonetheless a startling concession on his part.
2. Reich claimed World War II was an example of successful Keynesian stimulus, but if he wants to make that argument, then he needs to explain why we didn’t fall back into the Great Depression after the war – which is what all the Keynesians warned would happen.
3. For reasons outlined in my beat-down of Krugman, I’ve become a cheerleader for Estonia and used the interview to promote that country’s fiscal restraint.

If you want to understand more about Keynesian economics and why it doesn’t work, this video will be more instructive than my food fight with Reich.

P.S. Obama is monotonously repetitive in his claim that the economy is facing headwinds. As this Ramirez cartoon illustrates, he’s right, but not in the way he thinks.

[bray]

WWII is not an example. We came out of the Depression when Roosevelt took his hands off industry and let them loose. It is an example of what we should be doing and that is taking the regulations off.

Pray for America

[ronnie raygun]

Angry little man, the air was not so pleasent at his altitude in the bubba administration, maybe some additional brain damage has occured because of this.

[Bidimus1]

Here are 2 videos by E-con Stories that do a great job of showing the difference between the Austrian Model-Hayek and Circular flow of Keynes

http://www.youtube.com/watch?v=GTQnarzmTOc&feature=player_detailpage

http://www.youtube.com/watch?v=GTQnarzmTOc&feature=player_detailpage

the second has better production values. (and better music)

[Bidimus1]

Here are 2 videos by E-con Stories that do a great job of showing the difference between the Austrian Model-Hayek and Circular flow of Keynes

http://www.youtube.com/watch?v=GTQnarzmTOc&feature=player_detailpage

http://www.youtube.com/watch?v=GTQnarzmTOc&feature=player_detailpage

the second has better production values. (and better music)

[MrB]

You might as well debate religion with a leftist as debate the efficacy of Keynesian economics. There just simply isn’t any way, in their minds, that it is not THE way to conduct the economy.

I believe it stems from their need for control. Keynesian spending puts the government class in control of the economy, instead of letting the people drive the economy.

[Travis McGee]

[upchuck]

I guess Ramirez didn’t get the memo. Everybody knows, “the private sector is doing fine.”

[Buckeye McFrog]

I liked him better as Kramer’s actor buddy on Seinfeld...

[wayoverontheright]

Keynesians always forget that the monies used to “stimulate” have to first be removed from the private sector. They completely ignore what would have happened had these monies not been removed through taxes.

They never consider the net effect.

[mjustice]

Very funny. I remember thinking the same thing a few years ago when I caught a re-run of Seinfeld.

[Carry_Okie]

The one thing Roosevelt’s spending did that helped the economy was to build massive hydroelectric production capacity rapidly. I can’t think of much else. No one will ever know if it would have happened faster had the economy been relieved of the burden of socialism.

[sickoflibs]

RE :”Reich claimed World War II was an example of successful Keynesian stimulus, but if he wants to make that argument, then he needs to explain why we didn’t fall back into the Great Depression after the war – which is what all the Keynesians warned would happen.”

This is the main Krugman argument too and depends on voters ignorance of history. FDR ran almost 10 years of the same public workers make-work programs before Pearl Harbor was bombed that Dems are recommending NOW. Them citing WWII as the example of successful stimulus is an admission that the FDR make work programs they loved failed not that they worked.

The idea that the WWII economy could be recreated, or that it would even be wanted, with stimulus government spending programs is absurd. If they were serious about this they would call for an invasion of Iran which they are 100% against.

[r-q-tek86]

ping

[St_Thomas_Aquinas]

-—Keynesians always forget that the monies used to “stimulate” have to first be removed from the private sector. They completely ignore what would have happened had these monies not been removed through taxes.
They never consider the net effect.-—

Bingo, although the true believers think that government experts are better at making economic decisions than the market.

The question then becomes what is meant by “better.” For us, free market transactions are always, necessarily acceptable to the buyer and seller. To them, the goodness of a transaction is determined by its value to society, however defined. In practice, this results in the growth of government, economic stagnation and, most importantly, the diminishment of personal freedom.

[loveliberty2]

Thanks for posting.

We have an opportunity right now for a "teaching moment" with our friends, our youth, teachers, and any who are seriously trying to understand the economic plight we're in.

Simply referring them to the Foundation for Economic Education web site might begin an enlightening experience for those who want to be able to counter the ridiculous claims of people like Reich and the "talking heads" on cable and network news.

On this FEE web page, are links to current articles, as well as archives. From simple economic lessons, like "I, Pencil," to a current work entitled "Great Myths of the Great Depression," there are easy-to-read explanations which explode the many myths of Keynesian ideas and other threats to individual liberty.

If our generations miss this opportunity to educate generations who have been deliberately misled and "dumbed down" by the controllers and censors of the so-called "progressives," then future generations most certainly will be slaves to big government and the tyrants who perpetuate them.

[stephenjohnbanker]

Henry Morgenthau Jr., Secretary of the Treasury under Franklin D. Roosevelt.

To FDR

” We are spending more money than we have ever spent before, and it does not work. After eight years we have just as much unemployment as when we started, and an enormous debt to boot.”

[Marathoner]

Is this the same Robert B Reeeiiiccchhhhh Rush made famous?

[citizen]

bump for later