Conor Clarke blogging at Atlantic Business has this catchy post title, "We are all Keynesians now (including Ronald Reagan)". He uses as evidence a quote he pulls from the NYT interactive guide to past recessions and attempts to work our way out of them as narrated by various professorial types. Clarke quotes Jeff Frankel as follows:
Even though it wasn't done under a Keynesian banner or with Keynesian intention, it did have Keynesian effects, and it did help pull us out of the recession of 1981-82.
Let's apply that logic to other areas, like say chemistry, even though it wasn't done under a hermetic alchemical banner, or with alchemical intention, it did have alchemical effects, and they did manage to transmute lead into gold.
Keynes in a lot of ways is like an economists version of Plato. A thinker with some big ideas, but ideas that were created in a closed system resistant to experimentation and the scientific method. When Plato expanded the classical system of four elements and used it to explain all observable phenomena, he was really just talking out of his ass, but he talked so well, folks listened for many centuries. He was so persuasive that when people tested his theories, they questioned their experimental results, or forbade experimentation all together, rather than question the theory.
Seems Keynes holds a similar position for a certain ilk of economists and political scientists. Keynesian economic policy appeals to progressives given that it requires a firm central government hand guiding fiscal policy, and all that spending can be used to transform societies from the top down. Problem is, Keynesian efforts to combat recessions have failed every time and every place they've been attempted, there has never been a recovery, anywhere in the world, that could be called classically Keynesian. There have been economies that have recovered despite Keynesian policies enacted by governments, but those have all been due to other forces at play.
President Obama seems intent on steering us towards a centralized government, with a domineering executive branch, and within that executive branch the decision making will be largely divorced from the traditional bureaucratic structure in place. He's weakening the various cabinet positions while installing all these new 'czars' to oversee policy, and the lure of spending unlimited funds makes the Keynesian method of economic recovery irresistible. That's why it's in Obama's interest (and those that support his goals) to exaggerate the extent of the current crisis (or even help make it worse) so that massive increases in non-defense and non-entitlement spending fueled by skyrocketing budget deficits will be our only way out of the situation we're in.
Total load of crap, obviously, we've seen supply side oriented policies work over and over again, and not just in the USA. There are those that insist on rejecting the possibility that reducing government, increasing the flexibility businesses have to respond to this mess by lowering their tax burden, and easing the regulatory maze they must navigate, are all bad ideas because of the current recession. This is the best time to get a bit libertarian on this government's ass. A shame voters didn't vote that way. A high price is going to be paid for the decisions folks made in November 2008, these debts we will be incurring along with the power the federal government is likely to usurp (it's rare for that power to ever revert back to the states or citizens once it's flowed towards Washington) are going to last a lot longer than the current economic crisis.
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