WSJ: Prepare for a Keynesian Hangover
Our government's spending orgy will haunt us in 2010.
By BENN STEIL
In 2008, as the U.S. economy teetered under the weight of years of reckless credit expansion, the Bush administration decided against proposals to sweep out the bad debts from the banking system and then fix the regulatory structure—an approach based on tried and tested models from the S&L crisis and other financial crises.
We will pay the price for this decision in 2010. That's because the Obama administration and the Federal Reserve are plowing forward with Plan B: Nationalize credit creation and "stimulate" the private sector by spending in its stead.
Richard Nixon's famous line, "We're all Keynesians now" never seemed more apropos. With the budget deficit at an eye-popping $1.4 trillion, and on track to stay above $1 trillion indefinitely, Berkeley economist Brad DeLong writes breezily in his Nov. 30 blog that "anything that boosts the government's deficit over the next two years passes the benefit-cost test—anything at all."
http://online.wsj.com/article/SB1000142405274870327860457462...
__________________
Follow me on Twitter for news about Ron Paul, The Fed, & American Economy and Polity
What Keynesianism?
I am not a proponent of Keynesian economics, but before declaring it as a failed theory, let's actually practice it! Keynes called for deficit spending during recessions and running surpluses during good times. When was the last time the U.S. ran a surplus? 1950-something?
That's like arguing that Communism only failed in practice
but not in theory. No, the theory was just as flawed, because like Keynesianism, it is statist to its very core.
Amen
This is the real reason Keynesian doesn't work. It might work in a dictatorship, but never in a democracy. People seeking election generally get their seats by making promises.
A gov't can use spending to smooth out rough patches in an economy, but that requires slowing an economy down by cutting back spending and pay off debt in good times. What politician would ever agree to slow down a high growth economy?
As with many ideas, the majority of the problems are not with the idea but with its execution in the real world. This is why the gold standard makes sense. It gets government out of the process all together.
thanks for the link
.
Benn Steil
I'm watching this guy for a while now and he is quite unbelievable. He is a fellow in the evil Council on Foreign Relations, in the very heart of the establishment evilness, but he is almost Austrian! Check some of his older articles and debates, there's often video streams.
http://www.cfr.org/bios/1637/benn_steil.html
There's also a very interesting book forum on Cato website, about a book Steil coauthored with some South American guy, it's very interesting monetary reading:
http://www.cato.org/event.php?eventid=6102