I thought Keynesian economics was dead?
Clearly my education is incomplete. I thought the ideas of John Maynard Keynes were put to bed by Ronald Reagan and Margaret Thatcher. I thought even the most hard-headed of thought leaders – higher education – had replaced outdated, irrelevant economics texts with something more reflective of reality – that markets create growth (i.e., jobs).
But alas, I celebrated the renaissance of common sense too soon.
After choking down the idea that taxpayers had a duty to bail out greedy Wall Streeters for their excesses, we watched as the Congress, in its wisdom, also decided that government “stimulus” was needed to the tune of $700 billion (more taxpayer money). We were told that if we embraced the idea that government spending can improve the economy and create jobs, we would arrest unemployment at 8%…then it climbed to more than 10%.
Oh, and when the American auto industry – crippled by intransigent unions demanding more money for less work, gold-plated pensions, and increasingly unappealing cars – hit the wall, the American taxpayer was on the hook for that industry’s failures as well.
Have any of these lavish expenditures resulted in anything that was promised? No, but they did inflate our deficit to a previously unbelievable $1.5 trillion and our national debt to an even more unbelievable $12 trillion.
We all took notice when the Nobel Committee awarded their peace prize to Barack Obama, whose greatest accomplishment to that date was finding the bathrooms in the White House. But even more shocking was their awarding the economics prize to loony lefty Paul Krugman in 2008. (Yes, this is the same Nobel Committee that awarded the 1976 economics prize to Milton Friedman and the 1974 economics prize to Friedrich August von Hayek)
Krugman, who is surely disappointed that the Soviet economic model is no longer around to provide inspiration, has parted ways with Obama because he isn’t spending enough and has become one of the primary advocates for Stimulus II. Krugman and the far left have tried to label the Republicans as the “Party of No” for trying to stand in the way of the runaway truck of government spending.
Perhaps even farther on the fringe than Krugman (and no doubt in contention for the 2010 peace prize) is Washington Post economics writer Ezra Klein, whose recent piece, “California’s scary sneak preview” argues that minority Republicans in the state legislature (they control only 28 of the 80 seats in the Assembly) who refuse to support tax increases are the problem because “The minority party spied opportunity in fiscal collapse. If the majority failed to govern the state, then voters would turn on them…”
Well, Ezra, for starters, the majority has indeed failed to govern the state, unless you call unrestrained government growth “governing.” Second, while there might be political opportunity in this disaster, perhaps what very minority Republicans recognize is that the problem is not the tax rate, it’s the spending rate.
California has the highest sales tax in the nation at 8.25% (with local taxes it can reach as much as 10.25%) and the second highest income tax at 10.3%. Does that sound like the Golden State isn’t taxing enough? Of course not.
And frankly, California is hemorrhaging jobs because job creators are fleeing the state thanks to the taxes. It’s a running joke in California that Texas Governor Rick Perry spends more time in California than Texas luring businesses to the tax friendly Lone Star State. Nevada even runs television ads in California promising a much friendlier business climate.
America’s problems lie with today’s politicians who worry more about satisfying special interests who can assist their reelection than making tough decisions. It’s been very easy for these politicians to promise gifts to voters during the last fifteen years of boom times, but now the tab is due.
Keynesianism is useful if you need justification for economic bribery – which is what contemporary policy-makers use spending policy for. The Keynesians political acumen is even further departed from reality than their economic theory, as polls show that Americans prefer to keep the deficit in check rather than “stimulate “the economy through more spending by a twenty point margin. If Krugman wants to label the Republicans the “Party of No,” I might start buying the New York Times again.
Jason Roe brings nearly 20 years of experience on campaigns and public policy at the federal, state and local levels. Jason founded Federal Strategy Group, one of the largest public affairs firm in the United States. Jason is a past vice president and secretary for the Congressional House Chiefs of Staff Association and member of the Board of Governors of the National Republican Club (Capitol Hill Club). He graduated from Western Michigan University with a degree in Public Administration and Economics.