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The right doesn't John Maynard Keynes' principles after all.
The gist of Keynesian economics is fairly straightforward: during an economic downturn, caused by insufficient demand, it's up to the public sector to inject capital into the system while consumers and businesses pull back. It's what FDR used to rescue the country from the Great Depression and it's what President Obama used to rescue us from the Great Recession.
Republicans, at least the contemporary version of them, loathe Keynesian economics. As the GOP sees it, supply and demand aren't as important as shrinking government during a downturn. When consumers and businesses pull back, Republicans argue, the economy will improve if government does the same -- taking capital out of the struggling system -- and focuses more on debt reduction and less on growth.
It's why, in 2009, at the height of the global crisis, congressional Republicans not only vehemently fought against a Keynesian stimulus, they also strongly recommended a five-year federal spending freeze (a proposal even David Brooks characterized as "insane").
In 2012, however, Republicans have suddenly discovered the inner Keynesians within.
Sen. Harry Reid's refusal to "back off" looming cuts to the Pentagon won't just harm the nation's security, Republicans say. It could plunge the fragile U.S. economy back into a recession next year. [...]
"Puzzling" was how Minority Whip Jon Kyl (R-Ariz.) described Reid's remarks. With CBO's warning, Congress should be looking at every possible option to renew the Bush tax cuts and avoid the automatic, across-the-board cuts to defense and domestic spending.
"The whole point here is to try to get some economic growth, job creation, to get out of this recession," Kyl told POLITICO. "Why would we risk going backward with policy that even CBO says would be the wrong prescription right now?"
Sometimes, I can't help but feel like I'm stuck in a Lewis Carroll novel.
In this case, Republicans not only demanded debt reduction during last year's debt-ceiling hostage crisis, they threatened to crash the economy on purpose unless they got their way. Democrats struck a deal and the GOP got what it wanted -- with spending cuts due to kick in just as Bush-era tax rates expire, which happens to be another Republican proposal.
Senate Majority Leader Harry Reid said this week that unless his foes want to strike a broader deal involving new revenues, he intends to stick to the plan the GOP said it wanted -- they asked for automatic spending cuts and deficit reduction, so Reid will stand by the automatic spending cuts and deficit reduction.
And yesterday, GOP officials said spending cuts and deficit reduction would take capital out of the economy, undermine demand, and hurt economic growth. In other words, Republicans have enthusiastically embraced the very Keynesian economic principles they claim to hate.
It's not just yesterday, either -- none other than Mitt Romney argued this week that he can't accept too many spending cuts in his first year as president because it would undermine demand and push the economy into a recession.
So he's a Keynesian, too.
I realize, of course, that Republicans aren't actually genuinely embracing the left's economic model; they're just scurrying to protect tax breaks for the wealthy and Pentagon spending. This isn't about ideological consistency or policy principle; this is about the right doing whatever it takes to get the policy outcomes it wants.
But that doesn't mean the GOP's new arguments should be dismissed out of hand. On the contrary, this is an opportunity for the left -- according to new Republican arguments, spending cuts and taking capital out of a fragile economy is dangerous and wrong.
Perhaps, the next time conservatives scream bloody murder about a non-existent "debt crisis," or cry about the horrible burden the deficits will put on our poor grandchildren, Democrats might take a moment to remind their friends on the other side of the aisle what Republicans argued the week of May 25, 2012, when the GOP effectively argued, "Screw the debt crisis; we want more spending and extended tax cuts."
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The Republican Plan is "Keynesian" as long as the stimulus is just tax cuts and spending on the Pentagon. Other spending cuts are OK.
The rich get richer, my beeee-atches! Defense corporations are people too, my friend!
I'm interested to hear how our right-leaning friends out here explain this apparent GOP shift in philosophy. RobDon? chemdmd? skip? Seriously, I'm not being smug here; I want you to discuss this so we can understand how you see things.
Hey there KJ,
I have never denounced the stimulus, but I just see a lot of government waste in general and lean towards trying to cut out the waste and cutting non-essential funding - in the short term - to help with deficits/debt. During surplus years I am all for funding of the "want" type programs, but during times with very large deficits I would only fund "need" type programs (food stamps, welfare, medical, etc) - AND increase revenues (taxes). No problem with that.
As for the "apparent GOP shift" - I don't think it is anything new. I am not a card carrying GOP member and I do find that at times BOTH major parties will talk on both sides of an agrument. It is just the GOPs turn :).
Thanks skip - I appreciate the response. And your view is actually consistent with the non-Keynesian approach, so you get points for not talking both sides of the argument.
To be fair skip isn't a Republican. He often gets people riled up because he plays devil's advocate and tries to point out the flaws in other people's thinking. It's an important but unappreciated role ;-).
I was aware of skip's independence - that's why I used the term "right-leaning" rather than Republican. But thanks anyway Mouzer.
You are correct KJ- I read it but misunderstood the context. Consider my previous post redacted. My bad, my friend =)
Mouzer,
Don't make me blush. :)
Mouzer - not a problem. Have a great holiday weekend. You too, skip!
Government is to insure free markets, not regulate them. Free markets are the source of all values. These markets will have "adjustments" as markets often switch and change, an attempt by philosophy to blunt such adjustments via government is to live in denial of the reality of laissez fare.
Regulatory agencies have destroyed more jobs and wealth than any single act of government except for Congress and their inter-state commerce meddling.
How did the United States become one of the wealthiest nations? Value production. Freedom that every man, woman and child can with the use of their mind and efforts rise in economic means, and for everyone who does, thousands are enriched.
So as President or a member of Congress or in the wake of the stock market crash of 1929, you'd have done absolutely nothing? That didn't happen because of regulation - it happened in the absence of them, and promtped some very important and necessary regulations.
How did the US become one the wealthiest nations? We were the last one standing after WW2, when the rest of the industrialized nations had virtually destroyed themselves.
Until then, we were essentially 2nd rate.
Laisse Faire brought you Standard Oil, Ma Bell, International Harvester, US Steel, and American Tobacco. But hey, nothing wrong with a little monopoly power to bring us the best products at a fair price, right?
I would agree with ensure, but not insure. But where exactly to you get that government cannot regulate them?
Such incoherent clap-trap isn't convincing of anything. Government taking action is a denial of Laissez Faire? I guess so. But are you saying that's a bad thing?
If you were capable of reading, John, something I doubt since you're a Republican, I would recommend you read "No Ordinary Time" by Doris Kearns Goodwin, where you would find out that the reason why the US was able to become the "arsenal of democracy" had nothing whatsoever to do with Laissez Faire economics and everything to do with government intervention and regulation of the Republican business morons, most of whom would have been happy to do business with Hitler (as George W. Bush's grandfather, Preston Bush, actually did, only avoiding indictment under the Trading With The Enemy Act by getting himself elected to the Senate).
But then again, if you were intelligent enough to follow my suggestions, you'd be too smart to flunk the IQ test low enough to be a Republican.
Garwin (no wonder you're a Republican, with a name like that, right up there with Reince): Always nice to see one of the other species of hairless biped on the planet, Homo Sap, demonstrate that lack of frontal lobes and opposable thumbs doesn't mean you can't use a computer. I suggest you go actually read Adam Smith and the other classical economists (that's assuming you can read words of more than one syllable and understand them, a fact definitely not in evidence here), where you would find out that they believed the exact opposite of what you learn in your Sunday School there at the local mega-Republican-indoctrination center.
@ John,
Actually, I would say it was after WWI when all the other powers had bankrupted themselves and bled themselves almost to death that America became number 1.
The fact that Republican isolationists just turned their backs on any desire to exploit that status is what makes it less than obvious.
@ JK
You are so right. My life time has seen the peak of American power, wealth, and economic fairness. During those times the maximum marginal tax rate was always over 75% and there were many regulations. I simply will never believe that high marginal tax rates and regulations will always make it impossible for the nation to prosper, that is, to have power, wealth, and economic fairness.
@ TCinLA,
I do not know if or that John is a Repub. I can see that his post in NO WAY showed that he is a Repub. He denounced monopoly power.
You, on the other hand, really need to take civility lessions.
Well, as it happens, I am registered as a republican. However, it doesn't follow that I don't (can't) read, have a low IQ, or am in some way deficient mentally.
On the other hand, people that display rabid bigotry may actually have some sort of mental problems.
And just for the record, I have read that book, along with a whole slew of others.
Woa TC come on man. Breathe a little for me ;-). John is a good guy don't go harping on him just yet. John was denouncing monopoly power in his post and I think you may have missed that part so it might be worth it to go back and read the post again. His point being that when you have a completely "free" market that will end up only favoring economic monopolies. And for the record John is correct- in fact he is arguing what any pure capitalist economist would argue.
Absolutely no pure capitalist economist would argue that regulations are not necessary to keep the system from devouring itself.
In fact free markets by their very nature devour themselves if left unregulated and this is not disputed in economic circles. The only dispute is how much regulation should exist. Some believe we currently have too much regulation, some believe we have too little. But all agree that if you do not adequately regulate the markets then companies will become giant behemoths w/ undue power over society and will begin to gamble and destroy all other entities in their sector until they finally implode leaving the rest of us to pick up the pieces. We saw a milder version of this in 2007 and before someone asks yes that was mild by comparison of what it would have been had no regulations existed as opposed to less regulations. If we had the world Garwin is advocating, in other words, that collapse probably would've ended the country in terms of the economy.
Garwin is advocating Austrian economics which has always been considered radical and only plausible in a utopian world. I have talked before about there being a strong libertarian push in American politics. Libertarianism is, in it's essence, the right-wing version of the left's communism. It's not communism in the sense of it's application, but rather like communism it relies on this fantastic idea that the world is pure and everyone and everything w/in it only ever operates in the best of ways. The market is impure by it's very nature. Humans are impure by their very nature. If you make an economic model around the idea of markets being pure or humans being pure then your economic model has automatically left the real world. In the case of communism that was an economic model designed around the idea that humans will always collectively work for the greater good. In the case of Austrian economics this is a theory surrounding the idea that markets will always work collectively for the greater good. Both are completely implausible in the real world.
Steve, I'm with you, man! Let's add Germany and the Scandinavian countries as examples of relatively high tax rates, major government programs/beneifts, and all around happiness (the latest survey had Norway, Denmark and Sweden in the top five "happiest countries".
I want what Germany has: High wages, high union participation, paid healthcare, paid vacations, etc, etc. I just read that the average German works 1000 hrs LESS than the average S. Korean. Wow. Just, Wow.
Everyone wants to preserve spending on their "national priorities." And if there are to be cuts, it should be on the other side's "pet projects."
The difference really does come down to who your constituents really are, the 1% or the 99%.
My pet peeve about the "tax breaks for job creators" notion of economic growth:
Businesses are taxed on their profits, not their gross income. Payroll is an expense. So hiring someone reduces profit and therefore reduces your business tax. So actually, lower taxes increase the incentive to NOT hire, since you keep a larger portion of the unspent wages.
The reality is, the only real incentive to hire anyone is demand for your product or service. Anything else is just a bad business decision.
The solution would be simple, if we didn't have to deal with guys like Kyl, who lacks frontal lobes and I believe once won the prize for Dumbest Senator (a tight race given the competition in his party).
Did you ever notice what a low forehead Paul Ryan has? A sign of a small neocortex, which explains everything you need to know about him. Most Republicans have low foreheads for the same reason - their stupidity is genetic.
Imagine a world without republicans.....
Another Lenonist?
and no religion too? Nothing to kill or die for? Sheesh,are you some kind of dreamer?
Perhaps those kindly job creators would invest some of those record profits they've been hoarding to inject capital into the market? But then they couldn't make more money on their money, so they can bribe more politicians to wreck more economies to make more money on their money. Someday journalists are going to understand that capitalism is merely another ponzi scheme to justify exploiting billions of humans in order for thousands of humans to live in obscene luxury.
I think if the GOP worships the rich large corporations in America they should go work for them and quit their current job, because they aren't doing their job working for the American People. They obviously are working for the wrong People right now.l