We Are All Keynesians Now
By Miryam Lindberg.
John Maynard Keynes is the British economist that developed Keynesianism, a school of economic theory.
In 1998, the world-famous progressive economist and Nobel Laureate of Economics Paul Krugman, asked Why Aren’t We All Keynesians Yet? Although his every paragraph was instantly rebutted , almost 12 years after he wrote his article, we seem to have ultimately reached that shore – even if we didn’t actually want to.
Politicians can’t control their immense appetite for spending; I think it’s humanly impossible for them not to spend. Their power depends on that spending. To hold on to their power, politicians need that their voters depend on them. As political philosopher Tibor R. Machan once pointed out; “Throughout most of history, governments – usually monarchies headed by kings, emperors, pharaohs and other major or minor tyrants – actually owned everything under their rule, including, believe it or not, the people.”
With the advent of liberal democracy, the process is much more refined. Politicians “buy” our votes and goodwill offering us everything under the sun with catchy, appealing names; you name it, they have it – does pork barrel ring a bell here? Politicians are known for their amazing talents in the art of promising the moon – and the people for naïvely believing them and forgetting these wise words attributed to Thomas Jefferson: “A government big enough to give you everything you want is big enough to take away everything you have.” Apparently, we the people have yet to understand that, as there’s no Santa Claus, there are no free lunches, either. Who do you think pays the final price tag? Just like with Santa, it’s you – invariably and unequivocally you.
In very simple terms, Keynesianism, the school of economic theory developed by British economist John Maynard Keynes, advocates government intervention to correct the inefficiencies of markets with monetary and fiscal policies to “stimulate the economy” and to “create jobs.” Ever heard the phrases “economic stimulus,” “stimulus package,” “help the economy,” job creation package”? It’s Keynesianism in a nutshell and it implies a particular approach to public policy.
The problem is that history proved Keynes wrong and unfortunately man is the only animal that trips over the same stone twice. Thus, after FDR’s first New Deal (a surfeit of Keynesianism,) America is being subjected to its second New Deal with President Obama in spite that the nation is all but broke. Western governments in general are also following the same destructive path.
Keynes gave social democracy its intellectual wherewithal – and to politicians the perfect excuse to spend. Europe, the standard bearer of social democracy and the welfare state model, is drowning in a terrifying debt crisis because its politicians have been spending irrepressibly and levying draconian taxes to deliver all those cushy, “free” entitlements that Europeans have come to see as inherent rights. Try to cut any of those perks and expect to see riots, protests, and social unrest spread like wildfire. Look at Greece now that the day to pay for the bill has come to knock on its doors. “The fix of this [debt] problem needs to be a political solution, and you can’t easily persuade people or politicians to accept this kind of medicine,” said Steven Bell, chief economist of GLC, the London-based hedge fund to The Washington Post.
Mr. Bell is right. Yet it’s far too hard after decades of runaway spending and alleged free lunches. “Keynesianism has conquered the hearts and minds of politicians and ordinary people alike because it provides a theoretical justification for irresponsible behavior,” explains University of Chicago Booth School of Business Prof. Luigi Zingales in The Economist . “Keynesian economists tell politicians, who are addicted to spending our money, that government expenditures are good. And they tell consumers, who are affected by severe spending problems, that consuming is good, while saving is bad.” By now, we know the result of that misguided advice.
Money is a commodity like any other product, but while most products are manufactured and traded in free markets, money isn’t. It’s a monopoly, worst yet, a government monopoly that politicians have rigged to their advantage. As a result, Western governments have been spending taxpayers’ money as drunken sailors, regardless of party affiliation, thus promoting inflation. As French economist Guy Sorman writes; “Inflation [is] always caused by governments’ spending more money than they have, and then printing extra money or borrowing to finance the expenditure; [this behavior] destroys entrepreneurship, slows growth, and generates social inequality.”
Politicians pay lip service to the free-market system to then attach all kinds of regulations, taxes and protectionist measures that stifle the freedom markets need to be more efficient. Trillions of taxpayers’ dollars are in their hands, but it’s never ever enough for their grandiose plans, so they create money “out of thin air” to get even more funds. They tamper with Adam Smith’s invisible hand, vainly thinking they have the power to control and steer the economy according to their social engineering plans. Probably due to their economic illiteracy – and buckets of arrogance – they ignore F.A. Hayek’s dictum which says that, just as language, market outcomes are “the result of human action, but not of human design.” Politicians’ fatal conceit is to presume they can micromanage the markets and our lives.
A look at the membership of the 111th Congress shows that out of 435 representatives and 100 senators, not one of them is an economist. None… but you have plenty of lawyers (168 in the House and 57 in the Senate.) That should give you an idea of their expertise on economic issues. Consequently, their policies foster economic crises, financial panics, overbearing regulation, and undesirable bailouts. Then, when the chickens come home to roost, politicians have the chutzpah to put the blame on everybody else and to present themselves as the saviors of the day. How? Raising taxes, printing more fiat money, and auctioning off trillions of dollars in fresh, new debt… to spend some more. It’s time to break that evil circle.
The current economic mess has shaken the American people’s trust in the political class; polls currently indicate that 78 percent say government spending is out of control; 81 percent of voters say they are fed up with the growing federal deficit; 59 percent of voters say they do not trust the federal government; and citizens’ satisfaction with the direction of the country is at 19 percent. The “Throw the Bums Out” sentiment is brewing slowly but surely and one evident manifestation of this dissatisfaction has been the virulent growth of the Tea Party Movement. If those terrible poll numbers persist over a sustained period of time, they may bring forth decisive changes in the “social contract” between the Government and the American people.
Thrifty governments foster prosperous societies. But Congress, the Obama Administration, and their Keynesian policies are just adding to the gargantuan American deficit. The latest distressing economic news says that the United States is “‘substantially’ closer to losing its AAA credit ratings.” Nonetheless, in a new show of hubris, Treasury Secretary Timothy Geithner has bluntly assured the people; “That will never happen to this country.” Really? What makes America immune to that fate? Or are the politicians actually in denial?
This state of denial is dominating a political class ready to continue spending and printing money unabashedly. The most recent example is health care reform and its unrealistic promises: Add 40 million new users to a system and say that not only will it not add to the deficit but it will actually reduce the deficit. If that feat were possible, it should be renamed Obamagic instead. Projecting costs has never been the Government’s strong suit – think budgets, wars, Medicaid, Medicare, Social Security, et al…. With such a dismal track record, why should anyone believe that this time with health care it will all be different?
Back to reality: The best way to reduce the deficit is not to spend. The best way to reduce inflation is not to print fiat money to continue spending. It’s that simple; however, since their clinging to power depends on spending and printing money, politicians will keep on doing it – until the citizens decisively say enough is enough. Americans have a great chance in November to turn that tide. We don’t want to be Keynesians after all. There are some good, knowledgeable people running for office. Please, do choose wisely and hold them accountable.
©2010 Miryam Lindberg
Miryam Lindberg is an advisor to the Foundation for Defense of Democracies, an American policy institute focusing on terrorism and Islamism as well as a terrorism and political analyst to the Strategic Studies Group.
Look Around America! How Stupid Can Some People Be. Or Perhaps Obstinate Is A Better Word. How Many Heads Do You Still See Hidden In The Sand! Our Role In All This? Get One Of Those Heads OUT OF THE SAND! Open One Pair Of Eyes! There's Lot's Of Work Ahead, Let's Roll!