Deconstructing "Progressive " thought

[Nemo888]

I have to agree with you Thucydides.

Those that can't attack the policies, attack the people.

Those that attack a group, because they have no other avenue, as xenophobic, Islamophobic (to a laughable, sickening, paranoid kind of way), and evangelical Christians have already lost.

Unfortunately, this same sad, misinformed and delusional group are losing their way. They are now moving from making, or proposing policy, to attacking individuals on the other side.

It's all over. The great socialist experiment proposed by Trudeau and his communist ilk, is dead in the water.

People are going to start taking back what is their's.

The socialist members of the liebrals and NDP have shot their last wad. Most have grown up, started earning a wage, and become Conservatives.

Make no mistake. There will be riots and condemnation, similar, if not worse than Britian. This will happen when the Government says " We're not paying you to sit in the pub all day or frig about at the track because we feel bad you pissy pricks can't find a job.

The day of the slack jawed freeloader is coming to an end.

Riots? Who cares. Long term gain for short term pain.

Lets contrast socialist Germany with the United States. I know who I am betting on. The Tea Party in the US is making bad decisions based on doctrinaire reasoning. Shrinking GDP will decrease tax revenue and throw the economy into reverse, during a reccession this is punitive. I think you have mixed up who the extremists are. Traditional fiscal Conservatism would keep cuts to less than GDP growth for the foreseeable future until the books were balanced. Slow and steady. Not slashing madly IMO.

 

[Kirkhill]

Lets contrast socialist corporatist (fixed) Germany with the United States...... Shrinking GDP will decrease tax revenue and throw the economy into reverse  ....  Traditional fiscal Conservatism would keep cuts to less than GDP growth for the foreseeable future until the books were balanced. Slow and steady. Not slashing madly IMO.

.....the implication is that the U.S., as part of a balanced approach, should begin collecting more taxes to boost revenues.  This analysis seems simple and is allegedly based on Canadian practice, promoted as the balanced Canadian approach. Perhaps, it is said, the United States could split the difference on its looming fiscal crisis. It could raise taxes by, say, 30% while cutting spending by 20%. Such a lack of “ideology” allegedly saved Canada.

Except that nothing of the sort happened. Taxes did not increase in Canada in 1995 and in the years following, either at the federal level or across the Canadian system. As the chart above shows, spending by all levels of government hit more than 53% of GDP in the early 1990s, and then began a slow slide in the wake of the 1995 spending cuts and a broad ideological consensus in Canada that spending had to be cut. Taxes were never raised to fight the deficit and, in fact, declined as a percentage of GDP over time .

  Terence Corcoran

Edited to fix inconsistent argument on my part.....

 

[Nemo888]

In the long run America shouldn't raise taxes. They need to be more efficient like us. Canadians only pay 2% more of GDP in taxes compared to Americans(2010). But the cuts need to be slow so as not to hobble the economy. Taxing those making more than 240,000$ a year at Clinton levels sounds expedient to me if I was American. Not permanently, but the economy is barely treading water. Cut too much now and that boat will sink.

We did cut 70,000 government jobs last month, but we gained 90,000 private sector ones and 19,000 stopped looking for works. Somewhat worse than projected. But the idea is to not cut faster than growth. Cutting 700,000 public sector jobs would not be 10 times better. The Tea Party idea that cuts magically fix everything is somewhat divorced from reality.  The thesis and antithesis of left and right working together has created the modern Social Capitalist states like Canada and Germany. Going backwards to the robber baron days is only progress to robber barons and monopolists. A few months in Argentina or the Philippines would show you how such ruthless societies really work. I'll take Canada or Germany any day over these corrupt places.

 

[a_majoor]

You continually assert that deep cuts don't work, even though deep cuts were what did work in Canada during the 1990's, and the Red and newly Red states that are cutting spending and holding the line on taxation are the ones which are gaining jobs and economic growth today.

Reality has a bad way of derailing ideology. My "conversion" to libertarianism happened in the early 1980's while studying economics, which was heaviy biased towards Keynsianism at the time. It was a strange experience to study models like IS/LM or the Phillips curve but see there was no relationship betwen the economic models being taught and the reality of the Reagan Revolution happening outside the walls. If you took what my professors said seriously, the economic conditions of the late Carter era and the economic recovery of the Reagan era were both totaly impossible; Keynsian economics explicityl denies that such an event as "stagflation" could occur (you can supposedly trade inflation for employment, check the statistics today and see how well that works), yet it happened in the  late 1970's, and is hapening now.

Keynsians also deny the effectiveness of tax and spending cuts (as you do), yet reading the economic statistics of the Thatcher, Reagan or Mike Harris era should give you pause in that argument (assuming you don't choose to ignore it or brush it aside with non sequiters about what sort of jobs were created). The reality is the growth of US GDP during 7 of the 8 years of the Reagan Administration was equal to the entire economic output of then West Germany, a nation usually considered to be an economic powerhouse of its own.

The Progressive era is over. The basic assumptions behind it have been revealed as bankrupt, and attempting to create the progressive state have literally bankrupted us. There will be a period of social disruption as the system collapses, which I find frightening, since history teaches that the usual response to social chaos is people turn the "the man on the white horse" to end the chaos. This wil also mean the end of our liberal democracy and the liberal democratic state for the forseeable future as would be Napoleons (or worse) seize and hold power with the promise of "stability" and "order".

 

[Redeye]

You continually assert that deep cuts don't work, even though deep cuts were what did work in Canada during the 1990's, and the Red and newly Red states that are cutting spending and holding the line on taxation are the ones which are gaining jobs and economic growth today.

Did you just conveniently forget, or deliberately ignore the whole Goods and Services Tax thing?

 

[Nemo888]

(delete this)

 

[Redeye]

I have to agree with you Thucydides.

Those that can't attack the policies, attack the people.

Sadly, the two are somewhat inseperable.

Those that attack a group, because they have no other avenue, as xenophobic, Islamophobic (to a laughable, sickening, paranoid kind of way), and evangelical Christians have already lost.

I beg to differ, and I have plenty of avenues to attack the idiocy that is the Tea Party - and have done so.  I won't waste my time supplying a laundry lists of quotes on the matter, but Tea Party darling Michele Bachmann, among others, fits the bill.  There are literally thousands of examples of each of those mentioned traits showing up amongst the Tea Party.  I've never, ever discovered a modern movement quite as contemptible, but I do believe we'll see over the next couple of years that they are in fact dead in the water.

Unfortunately, this same sad, misinformed and delusional group are losing their way. They are now moving from making, or proposing policy, to attacking individuals on the other side.

Wrong again.  They seem to  have plenty of policy ideas, and to be willing to work to a solution. Not so the dogmatist tea partier types. That was pretty clear during the recent mess over the debt ceiling down south.

It's all over. The great socialist experiment proposed by Trudeau and his communist ilk, is dead in the water.

And that has what to do with anything?

People are going to start taking back what is their's.

And this is why the Tea Party's corporatist masters are ultimately ******.

The socialist members of the liebrals and NDP have shot their last wad. Most have grown up, started earning a wage, and become Conservatives.

Speculation. Moving right along...

Make no mistake. There will be riots and condemnation, similar, if not worse than Britian. This will happen when the Government says " We're not paying you to sit in the pub all day or frig about at the track because we feel bad you pissy pricks can't find a job.

Speaking of baseless ad hominem... is that hypocrisy I smell?

The day of the slack jawed freeloader is coming to an end.

Great. Fortunately there's not many of them, but **** 'em. No one likes them anyhow.

Riots? Who cares. Long term gain for short term pain.

:  :facepalm:

 

[Nemo888]

Thucy; If your supply side economic theory(What George Bush senior called Voodoo Economics.) was right then Clinton's deficit reduction plan of raising taxes would not have worked. GDP would have shrunk, budget deficits would have balooned and interest rates would have spiked. Sorry but none of these things happened. Actually EXACTLY the opposite happened.

And even Reagan's Voodoo Economics is not as self destructive as the Tea Party. Reagan never let cuts outstrip GDP growth even at the cost of a ballooning deficit. Reagan never let that happen. He thought it was counter productive. So Reagan's economic policies are too left wing for you. I find that rather humorous.

You continually assert that deep cuts don't work.

No. Deep cuts work great IF they do not kill what they are intended to help. You can't cut more than growth without screwing yourself. If you want to cut more encourage the economy. Get the PM out shaking hands and send Industry Canada to drum up some business. (Pretty much what they are already doing.) Increase Asian and South American trade. Sign some free trade agreements.  Then you can cut to the degree you increase GDP.

 

[Kirkhill]

Did you just conveniently forget, or deliberately ignore the whole Goods and Services Tax thing?

What part of the "GST Thing"?

The Terence Corcoran Part concerning the revenue neutrality of the tax introduced by Mulroney and Wilson 5 years before Chretien and Martin got round to cutting the budget?

....Musing about the detrimental effects of tribal divides in U.S. politics, between big-government Keynesians and small-government Hayekians, he retold the Canadian story. “As various Canadian commentators have been pointing out in recent weeks, Paul Martin and Jean Chrétien slashed spending by 20% and increased tax revenues — largely through the GST, which they had formerly opposed.”

.....From where comes the idea that tax increases — through the GST — played a role in reversing Canada’s fiscal fortunes in 1995? The first observation is that the GST was brought in by Brian Mulroney’s Conservatives in 1990, five years before the crisis. But more important, there was no increase in tax revenue from the GST.

The GST is a sales tax that was brought in to replace another sales tax on manufactured goods. As tax policy goes, that was a good move: getting rid of a distorting tax that killed jobs in industry and bringing in a broad-based sales tax that was less distortionary. But there was no increase in government revenue. Looking at the numbers, the GST initially brought in less revenue as a percent of total federal tax revenue. As a percentage of GDP, the GST is flat or even slightly lower over the same period.
...

Or this part:  GST cut to 6%  July 1 2006

Or this part: GST cut to 5% Jan 1 2008 ( thereby leaving stimulating funds in the hands of Canadians just ahead of oil spiking over $100 (2 Jan 2008) which precipitated the 2008 crises).

Edit - Further to the above

...The Wall Street Journal reported on Tuesday (Aug XX 2010) on a $15 million fine levied against an oil trading group for illegal trades it made in pursuit of the very first $100-per-barrel crude oil future contract in 2008.

The CFTC filed and immediately settled charges against ConAgra Trade Group, the former commodities trading division of mega corporation ConAgra Foods for causing a “non-bona fide price” on the New York Mercantile Exchange oil market on January 2, 2008. According to the CFTC, the NYMEX floor trader for ConAgra had been directed by his superiors to buy the first $100 oil contract for a full three months before the transaction took place. On January 2, the price of crude was rising toward the $100 level, with the electronic price at $99.60 and trading floor prices around $99.90. To ensure winning the golden ticket that was the first $100 contract, the ConAgra trader proceeded to buy up all of the available contracts at $99.90 a barrel, which prompted an offer from a seller at $100 a barrel. The sudden snapping-up of contracts at $99.90 disrupted the oil market, causing widespread confusion over the “true” price of crude and leading another NYMEX floor broker to file a complaint that he was offering the contract at a lower price.

The disarray the action set off on the oil markets was apparently of little concern to ConAgra, which was obviously focused on the prize of a freshly-minted $100 oil contract. According to the CFTC, a ConAgra trader boasted in an email, “some people collect art prints, we collect price prints.” The ConAgra Trade Group no longer exists, as it was sold off to hedge fund Ospraie Management for $2.8 billion in June of 2008, and now operates as the Gavilon Group.

 

[Nemo888]

“My friends and I have been coddled long enough by a billionaire-friendly Congress,” Warren Buffet

http://www.bloomberg.com/news/2011-08-15/buffett-urges-congress-to-raise-taxes-on-coddled-billionaires.html

Buffett: Hike Taxes on ‘Coddled’ Billionaires

Billionaire Warren Buffett urged Congress to raise taxes on the nation’s wealthiest individuals to help cut the U.S. budget deficit, saying it won’t inhibit investment or job growth.

“My friends and I have been coddled long enough by a billionaire-friendly Congress,” the chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A) wrote in an opinion article published in the New York Times. “It’s time for our government to get serious about shared sacrifice.”

Buffett’s advocacy of higher taxes for the “mega-rich” may reinforce President Barack Obama’s call for an end to tax breaks for corporate-jet owners. In the op-ed, the 80-year-old investor said his federal tax bill last year, or the income tax he paid and payroll taxes paid by him and on his behalf, was $6,938,744.

“That sounds like a lot of money,” Buffett wrote. “But what I paid was only 17.4 percent of my taxable income -- and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.”

A 12-member panel, formed in the Aug. 2 law that raised the nation’s debt ceiling and averted a possible default, is charged with finding $1.5 trillion in budget savings.

Democratic Representatives James Clyburn, Chris Van Hollen and Xavier Becerra will join Republican counterparts Dave Camp, Fred Upton and Jeb Hensarling. The Senate team includes Republicans Jon Kyl, Pat Toomey and Rob Portman and Democrats Patty Murray, John Kerry and Max Baucus. Murray, of Washington state, and Hensarling, of Texas, will be co-leaders.
Millionaires

Buffett said that for those making more than $1 million -- there were 236,883 such households in 2009 -- he would raise rates immediately on taxable income in excess of $1 million, including dividends and capital gains. For the 8,274 taxpayers who made $10 million or more, he said they should get an additional increase in the rate.

“While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks,” Buffett wrote.

He cited Internal Revenue Service data showing that the tax burden on the nation’s wealthy had fallen for the past two decades.

In 1992 the top 400 American earners had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that amount, he wrote. In 2008, while the aggregate income of the highest 400 had soared to $90.9 billion, the rate paid had fallen to 21.5 percent.
Hiring, Investment

Buffett said the notion that high taxes discourage hiring and investment is false.

“I have worked with investors for 60 years and I have yet to see anyone -- not even when capital gains rates were 39.9 percent in 1976-77 -- shy away from a sensible investment because of the tax rate on the potential gain,” he said.

“People invest to make money, and potential taxes have never scared them off,” he said. “And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.”

The U.S. unemployment rate has averaged 9.5 percent in the past two years, dropping to 9.1 percent in July from 9.2 percent a month earlier, a government report showed Aug. 5

 

[Edward Campbell]

“My friends and I have been coddled long enough by a billionaire-friendly Congress,” Warren Buffet

http://www.bloomberg.com/news/2011-08-15/buffett-urges-congress-to-raise-taxes-on-coddled-billionaires.html

Buffett: Hike Taxes on ‘Coddled’ Billionaires

Billionaire Warren Buffett urged Congress to raise taxes on the nation’s wealthiest individuals to help cut the U.S. budget deficit, saying it won’t inhibit investment or job growth.

“My friends and I have been coddled long enough by a billionaire-friendly Congress,” the chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A) wrote in an opinion article published in the New York Times. “It’s time for our government to get serious about shared sacrifice.”

Buffett’s advocacy of higher taxes for the “mega-rich” may reinforce President Barack Obama’s call for an end to tax breaks for corporate-jet owners. In the op-ed, the 80-year-old investor said his federal tax bill last year, or the income tax he paid and payroll taxes paid by him and on his behalf, was $6,938,744.

“That sounds like a lot of money,” Buffett wrote. “But what I paid was only 17.4 percent of my taxable income -- and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.”

A 12-member panel, formed in the Aug. 2 law that raised the nation’s debt ceiling and averted a possible default, is charged with finding $1.5 trillion in budget savings.

Democratic Representatives James Clyburn, Chris Van Hollen and Xavier Becerra will join Republican counterparts Dave Camp, Fred Upton and Jeb Hensarling. The Senate team includes Republicans Jon Kyl, Pat Toomey and Rob Portman and Democrats Patty Murray, John Kerry and Max Baucus. Murray, of Washington state, and Hensarling, of Texas, will be co-leaders.
Millionaires

Buffett said that for those making more than $1 million -- there were 236,883 such households in 2009 -- he would raise rates immediately on taxable income in excess of $1 million, including dividends and capital gains. For the 8,274 taxpayers who made $10 million or more, he said they should get an additional increase in the rate.

“While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks,” Buffett wrote.

He cited Internal Revenue Service data showing that the tax burden on the nation’s wealthy had fallen for the past two decades.

In 1992 the top 400 American earners had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that amount, he wrote. In 2008, while the aggregate income of the highest 400 had soared to $90.9 billion, the rate paid had fallen to 21.5 percent.
Hiring, Investment

Buffett said the notion that high taxes discourage hiring and investment is false.

“I have worked with investors for 60 years and I have yet to see anyone -- not even when capital gains rates were 39.9 percent in 1976-77 -- shy away from a sensible investment because of the tax rate on the potential gain,” he said.

“People invest to make money, and potential taxes have never scared them off,” he said. “And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.”

The U.S. unemployment rate has averaged 9.5 percent in the past two years, dropping to 9.1 percent in July from 9.2 percent a month earlier, a government report showed Aug. 5

The reason Buffet pays tax at a lower rate than the other 20 people in his office is that almost all his income is from investments and investment income is taxed at a lower rate than employment income because "we" (all of us) want to encourage people to invest - to create jobs. It would be interesting to see the unemployment rate after investment income is taxed at the same rate as employment income.

 

[Infanteer]

Although I am no specialist at Tax Law and Tax Theory, am I a dummy for thinking something like 15% on all money made by a person, regardless of its origin or how much he/she made, is fair or is that just too simple?

 

[Edward Campbell]

I'm a flat tax fan - but a whole hockey sock full of top flight economists are not, so ... I am happy with the way some of those economists managed my money during 2008/09 so I suppose I should trust their judgement on the flat tax, too.

 

[Infanteer]

I'm a flat tax fan - but a whole hockey sock full of top flight economists are not, so ... I am happy with the way some of those economists managed my money during 2008/09 so I suppose I should trust their judgement on the flat tax, too.

I guess I can live with that....

 

[a_majoor]

In the Canadian context, a flat tax, single tax, fair tax (call it what you like) will save an extimated 3 billion plus dollars in costs for the taxpayers, who need professional help to file taxes (even non professionals choose to use services like H&R block because they find personal tax returns confusing). Eliminating most or all tax loopholes and deductions also reduces the amount of time as well as resources corporations and individuals need to do tax planning and calculate and process tax returns. Eliminating this cost, plus the time needed to do tax returns will free up time and resources to the productive economy. The cost to the taxpayer to staff and run the Canada Revenue agency will also drop, since flat/single/fair tax returns are much simpler to process and check, requiring far less staff.

Generally speaking this is a win-win situation for the taxpayer, and the government as well (since this sort of tax return will generate much less resistance and tax avoidance behaviour so long as the rate is set at a sensible level), most opposition that I have seen is generally the defense of the status quo, attempting to justify certain tax breaks or behaviours generated by the tax system. Dennis Mills once wrote a book on the subject ("The Single Tax") but it seems to be long out of print and I have not been able to find a copy to see his arguments.

 

[ModlrMike]

If there's anything to be learned in Canada from a flat tax, we only need to look at Alberta. There's been a flat tax at the provincial level for several years now.

 

[a_majoor]

Words of wisdom:

“To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our selection between economy and liberty or profusion and servitude.

“If we run into such debts as that, we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our callings and our creeds, as the people of England are.

“Our people, like them, must come to labor sixteen hours in the twenty-four, give the earnings of fifteen of these to the government for their debts and daily expenses; and the sixteenth being insufficient to afford us bread, we must live, as they now do, on oatmeal and potatoes, have no time to think, no means of calling the mismanagers to account; but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers.

“Our land-holders, too, like theirs, retaining, indeed, the title and stewardship of estates called theirs, but held really in trust for the treasury, must wander, like theirs, in foreign countries, and be contented with penury, obscurity, exile, and the glory of the nation.

“This example reads to us the salutary lesson that private fortunes are destroyed by public, as well as by private extravagance. And this is the tendency of all human governments.

“A departure from principle in one instance, becomes a precedent for a second, that second for a third, and so on, till the bulk of society is reduced to be mere automatons of misery, to have no sensibilities left but for sinning and suffering.

“Then begins, indeed, the bellum omnium in omnia (the war of all against all), which some philosophers, observing to be so general in the world, have mistaken it for the natural, instead of the abusive state of man.

“And the forehorse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.” –Thomas Jefferson

This predates the arguments of Friedrich von Hayek in The road to Serfdom, but Jefferson was describing the end, while Hayek describes the beginning.

 

[Redeye]

Here's conservatism at work:

http://motherjones.com/mojo/2011/08/florida-welfare-drug-test-costs

(shared with the usual provisions)

Rick Scott Takes the Piss Out of Florida Taxpayers
—By Adam Weinstein
| Thu Aug. 25, 2011 10:40 AM PDT Publik15/FlickrFlorida's neophyte Republican governor, tea-party-friendly Rick Scott, signed a bill back in June requiring the state's welfare recipients to undergo drug-testing urinalysis before collecting their monthly assistance check of around $241-to-$303. The measure, he said, would save taxpayer money by barring drug addicts from getting the dole. "Studies show that people that are on welfare are higher users of drugs than people not on welfare," he said.

Florida's welfare recipients are proving that Scott's assumption wasn't worth a warm bucket of pee. Now, the state is effectively being forced to pay for 11.5 gallons of welfare applicants' drug-free urine every month, to the tune of around $34,000.... [continues at link]

So, good old conservatives pissing away publlic money (no pun intended), and there was that whole "Rick Scott's company might benefit from it" problem too...

This is why I quit calling myself a conservative.

 

[a_majoor]

The underpinning of much "Progressive" thought is Keynesian economics, and its alleged impact on the US economy during the Great Depression. (The Forgotten Man tells a quite different story). With that prop gone, the ability to manipulate taxes, regulations and other economic tools to "help" people (usually cronies, although that is rarely admitted in public) will be much reduced:

http://pajamasmedia.com/blog/keynesianisms-collapse/?singlepage=true

Keynesianism’s Collapse

Posted By Tom Blumer On August 26, 2011 @ 12:15 am In Uncategorized | 41 Comments

A New York Times item [1] earlier this month about steps President Barack Obama might be considering to turn around America’s moribund economy caught my attention more for what it didn’t say than what it did, specifically in the following sentence:

    A wide range of economists say the administration should call for a new round of stimulus spending, as prescribed by mainstream economic theory, to create jobs and promote growth. It is clear that the House would never pass such a plan.

Times reporters Binyamin Appelbaum and Helene Cooper oddly never revealed that this “mainstream economic theory” subscribed to by “a wide range of economists” goes by a specific name: Keynesianism.

What a remarkable change from just a couple of years ago, when the Times routinely invoked the late English economist and his principles. A ridiculously biased and badly-in-need-of-updating Wikipedia entry on Keynes describes 2008-2009 [2] as the “Keynesian resurgence.” Serendipitously, on the last day of that two-year period, I was asking [3], “Economic Rebound? What Economic Rebound?” I’m still asking.

Far less than two years after the “resurgence,” odious Times columnist Paul Krugman demonstrated the utter bankruptcy of current Keynesian thought. In a televised CNN discussion on August 12 [4], he suggested an out-of-this-world idea:

    If we discovered that space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months.

This really should not have been surprising. Days after the September 11, 2001, terrorist attacks, Krugman wrote [5]:

    Ghastly as it may seem to say this, the terror attack — like the original day of infamy, which brought an end to the Great Depression — could even do some economic good.

You read that right. Keynes’s leading U.S. apologist admitted that nearly a decade of Keynesianism applied to the U.S. economy failed to end the Great Depression. In fact, unemployment during the 1930s until the onset of World War II was never less than 12% [6]. In Krugman’s warped view, Keynesianism has never really been tried, because no one has ever spent enough to give the theory a fair test.

But surely there is a basis for believing that Keynesian approaches should and sometimes actually do work, right? After all, it was “the dominant view in the economics profession for at least the next forty years” after the Depression.

The fundamental problem with Keynesianism is, with rare exceptions, essentially the same as as the one with most generals’ battle plans, as expressed by Colin Powell [7]: “No battle plan survives contact with the enemy.” Similarly, with perhaps the rarest of exceptions long, long ago, no Keynesian economic plan has ever survived contact with the government attempting to execute it. Governments have seriously abused Keynes’s original assertions, and have become so big and corrupt themselves that they are functionally incapable of successfully carrying out any attempted “Keynesian” stimulus which might theoretically work.

To fully vet my contention, let’s look at Keynes’s fundamental tenets as stated in a succinct adaptation [8] from Commanding Heights [9], a highly complimentary 1998 book by Daniel A. Yergin and Joseph Stanislaw (bolds and numbered tags are mine):

    … (Keynes) concluded that classical economics rested on a fundamental error. It assumed, mistakenly, that the balance between supply and demand would ensure full employment. On the contrary, in Keynes’s view, the economy was chronically unstable and subject to fluctuations, and supply and demand could well balance out at an equilibrium that did not deliver full employment. [1] The reasons were inadequate investment and over-saving, both rooted in the psychology of uncertainty.

    … The solution to this conundrum was seemingly simple: Replace the missing private investment with public investment, financed by deliberate deficits. The government would borrow money to spend on such things as public works; and that deficit spending, in turn, would create jobs and increase purchasing power. [2] Striving to balance the government’s budget during a slump would make things worse, not better. … As a corollary, the government would cut back its spending during times of recovery and expansion. [3]

    … Keynes intended government to play a much larger role in the economy. His vision was one of reformed capitalism, managed capitalism—capitalism saved both from socialism and from itself. He talked about a “somewhat comprehensive socialization of investment” and the state’s taking “an ever greater responsibility for directly organizing investment.” Fiscal policy would enable wise managers to stabilize the economy without resorting to actual controls. The bulk of decision making would remain with the decentralized market rather than with the central planner. [4]

    … Keynes provided both a specific rationale for government’s taking a bigger role in the economy and a more general confidence in the ability of government to intervene and manage effectively. Despite Keynes’s fascination with uncertainty and his speculative talents in the marketplace, Keynesians deemed “government knowledge” to be superior to that of the marketplace. [5]

    … How far reaching its impact, or at least the perception of its impact, was demonstrated by a history of economic thought published in the mid-1960s: “In most Western economies Keynesian theory has laid the intellectual foundations for a managed and welfare-oriented form of capitalism. Indeed, the widespread absorption of the Keynesian message has in large measure been responsible for the generally high levels of employment achieved by most Western industrial countries since the second world war and for a significant reorientation in attitudes toward the role of the state in economic life.” [6]

    … It was not until the 1970s [7] that evidence began to accumulate in many countries that Keynes’s theories, at least as implemented by Keynes’s advocates after his death, might not perpetually yield the favorable outcomes Keynes himself had predicted.

Notes:

    * [1] — One wonders how humanity ever progressed to the point it did by the 1930s if Keynes was really right. Logically, throughout the course of history we should have seen market-oriented cultures around the world chronically underutilizing their resources and capabilities for extended periods of time, incapable of turning things around on their own. We didn’t. In fact, only a decade earlier, the U.S. recovered remarkably well from the very serious depression of 1920-21 despite the fact that the government of President Warren Harding did very little to intervene [10]. The economy corrected itself, and fairly quickly, leading to the Roaring ’20s.
    * [2] — There are two problems here. First, as President Obama himself admitted [11] to the New York Times in 2010, “there’s no such thing as shovel-ready projects.” Although that was perhaps less true in the 1930s — ironically, because of today’s environmental red tape — it remains a fact that the government could not then as it cannot now hit the ground running with infrastructure spending. This leads to the second problem, which is that impatient, desperate politicians who want to pump money into the economy right now falsely invoke Keynes to justify throwing money at entitlement and other spending programs, demanding nothing of value in return. In the 1960s and 1970s, this outlook was expressed thusly: “It doesn’t matter what you spend it on, just spend it!” More recently, it has led to outrageous assertions by out-of-ideas politicians like former House Speaker Nancy Pelosi [12] and Ohio Senator Sherrod Brown [13] that money spent on unemployment benefits is one of the best forms of stimulus available.
    * [3] — Perhaps the biggest weakness of Keynesian thought is the naive belief that any government which gets used to spending more money will voluntarily acquiesce to spending less. It doesn’t happen, not even, as seen in recent years, when economic calamity clearly looms.
    * [4] — During the 1930s, which many history textbooks still regard as when “FDR saved us from the depression,” President Franklin Roosevelt “somehow” forgot about Keynes’s admonishment to avoid controls. In perhaps the most comprehensive program of status quo-protecting crony capitalism in history, FDR’s National Recovery Act required every major industry [14] “to draw up a code setting production quotas, limiting hours of operation, or restricting construction of new factories.” In general, governments find it almost impossible to avoid exerting undue and almost invariably harmful influence over an economy as they abscond with an ever larger percentage of its fruits. Recent examples include actions too numerous to mention taken by the Obama administration’s ever-encroaching regulatory apparatus.
    * [5] — This is yet another fatal Keynesian conceit. As many non-Keynesian economists and commentators have stated over the years, the idea that central planners can do a better job of managing an economy’s trillions of individual transactions and interactions better than the market’s everyday participants reflects the unbounded hubris of those who adhere to it, and has no support in the actual results of human history.
    * [6] — This is an especially odd belief in light of what really happened after World War II. For some reason, the 1950s is still idealized as a period of exceptional countrywide Keynesian prosperity. In reality, average annual real GDP growth from 1951-1960, an era also characterized by Big Labor and Big Business dominance of the private sector and extraordinarily high marginal income tax rates, was just above 3.5%. Given that America was still the only major power left standing, it should have greatly exceeded that. But during the five years following the John F. Kennedy-inspired income tax cuts of 1964 — a decidedly non-Keynesian action — the economy grew by an annual average of over 5%. The decade of the 1970s and its reversion to Keynesianism, during which Richard Nixon actually said [15], “I am now a Keynesian in economics,” was extraordinarily unimpressive, and marked in its later years by ruinous double-digit inflation and interest rates. In the 1980s, Ronald Reagan’s anti-Keynesian tax cuts, driven by a classical economist’s faith in the people, gave us The Seven Fat Years [16]. More recently, capital gains tax cuts in 1997 led to that decade’s final-years boom, and George W. Bush’s relatively modest but supply side-oriented cuts in 2003 led to 34 consecutive months where the seasonally adjusted unemployment rate was 5% or lower (July 2005 through April 2008).
    * [7] — The evidence of suboptimal results was really there in the 1930s, but the elites who controlled the political establishment and had a virtual stranglehold on the media consciously chose to ignore it.

Though it may not be fair to assign all of its results to Keynes and his theories, the ascension of Keynesianism as applied in the real world, its brief 2008-2009 return, and its still-present dominance of hidebound thought in academia and government were and still are products of an elitist class which feels that it alone possesses the intelligence and ideas which will make the world genuinely better. It has always been accompanied by a profound disregard for the wishes, dreams, and plans of others who will not conform to their supposedly enlightened vision. In the past three years, its application and misapplication have led the greatest economy ever seen on earth swiftly and dangerously down the path towards bankruptcy.

Article printed from Pajamas Media: http://pajamasmedia.com

URL to article: http://pajamasmedia.com/blog/keynesianisms-collapse/

URLs in this post:

[1] New York Times item: http://www.nytimes.com/2011/08/14/us/politics/14econ.html?_r=3&hp=&pagewanted=all

[2] 2008-2009: http://en.wikipedia.org/wiki/John_Maynard_Keynes#Economics:_the_Keynesian_resurgence_of_2008.E2.80.932009

[3] I was asking: http://pajamasmedia.com/blog/economic-rebound-what-economic-rebound/?singlepage=true

[4] on August 12: http://globalpublicsquare.blogs.cnn.com/2011/08/12/gps-this-sunday-krugman-calls-for-space-aliens-to-fix-u-s-economy/?iref=allsearch

[5] Krugman wrote: http://www.nytimes.com/2001/09/14/opinion/reckonings-after-the-horror.html?pagewanted=all&src=pm

[6] was never less than 12%: http://www.econlib.org/library/Enc/GreatDepression.html

[7] as expressed by Colin Powell: http://www.famousquotesabout.com/on/Plan

[8] a succinct adaptation: http://www.pbs.org/wgbh/commandingheights/shared/pdf/ess_keynesiantheory.pdf

[9] Commanding Heights: http://www.amazon.com/Commanding-Heights-Battle-World-Economy/dp/068483569X

[10] did very little to intervene: http://en.wikipedia.org/wiki/Depression_of_1920–21#Interpretations_of_the_end

[11] as President Obama himself admitted: http://www.cbsnews.com/8301-503544_162-20019468-503544.html

[12] Nancy Pelosi: http://www.therightscoop.com/nancy-pelosi-unemployment-insurance-is-one-of-the-biggest-stimuli-to-our-economy/

[13] Sherrod Brown: http://www.thepoliticalguide.com/rep_bios.php?rep_id=49342191&category=views&id=20101112110505

[14] required every major industry: http://www.ushistory.org/us/49e.asp

[15] actually said: http://en.wikipedia.org/wiki/We_are_all_Keynesians_now

[16] The Seven Fat Years: http://www.amazon.com/Seven-Fat-Years-How-Again/dp/002874022X

 

[Nemo888]

The banking failure was the last nail in anarcho capitalism's coffin. The underpinning of the majority of right wing politics is Keynesian style economics. Even saintly Reagan was a Keynesian. Compared to you though Reagan looks like Jack Layton. The anarcho capitalism of complete deregulation is considered dangerous for the same reasons dictators are feared. It concentrates too much power in too few hands. Capitalism has a natural tendency to monopolies. Anarcho capitalism is a political extreme and would probably make most people very miserable and a very few immensely happy.

You live in a Social Capitalist state. Almost everyone here loves the hybrid of capitalism and socialism. The most successful nations on earth are Social Capitalists. Left and right working together have made a rather glorious hybrid of both systems. Better than what either side have come up with on their own. We need more practical workable ideas. That is what the right needs right now. Not more dubious theories.