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The Keynesian Dead End

post #1 of 127
Thread Starter 
Keynes is dead. His policies even more so in the intelligent world.

http://online.wsj.com/article/SB1000...319857618.html

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The difference this time is that the Keynesian political consensus is cracking up. In Europe, the bond vigilantes have pulled the credit cards of Greece, Portugal and Spain, with Britain and Italy in their sights. Policy makers are now making a 180-degree turn from their own stimulus blowouts to cut spending and raise taxes. The austerity budget

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What the world has now reached instead is a Keynesian dead end. We are told to let Congress continue to spend and borrow until the precise moment when Mr. Summers and Mark Zandi and the other architects of our current policy say it is time to raise taxes to reduce the huge deficits and debt that their spending has produced. Meanwhile, individuals and businesses are supposed to be unaffected by the prospect of future tax increases, higher interest rates, and more government control over nearly every area of the economy. Even the CEOs of the Business Roundtable now see the damage this is doing.
post #2 of 127
Quote:
Originally Posted by Artisan Fan View Post
Keynes is dead. His policies even more so in the intelligent world.

http://online.wsj.com/article/SB1000...319857618.html

Wondering what a massive cut to your defence budget would do for your debt after ten years if you kept the same or lower taxes.

EDIt: Well not yours specifically, your credit cards probably look fine.
post #3 of 127
Quote:
Originally Posted by Artisan Fan View Post
Keynes is dead. His policies even more so in the intelligent world. http://online.wsj.com/article/SB1000...319857618.html
You're more active than usual big guy. Whats up?
post #4 of 127
Thread Starter 
Quote:
Originally Posted by CBrown85 View Post
Wondering what a massive cut to your defence budget would do for your debt after ten years if you kept the same or lower taxes.

EDIt: Well not yours specifically, your credit cards probably look fine.

You need to think about more than a defense budget. The whole budget here is growing like crazy. Welfare is projected up something like 14% per annum for three years. It's crazy.
post #5 of 127
Thread Starter 
Quote:
Originally Posted by Astan View Post
You're more active than usual big guy. Whats up?

I'm in a commentary mood.
post #6 of 127
Thread Starter 
Quote:
Originally Posted by Artisan Fan View Post
You need to think about more than a defense budget. The whole budget here is growing like crazy. Welfare is projected up something like 14% per annum for three years. It's crazy.

http://www.heritage.org/research/rep...20next%20steps
post #7 of 127
Quote:
Originally Posted by Artisan Fan View Post
I'm in a commentary mood.
IMO its a bad idea to generalize with economic theory. Keynesian or Neo-Classical have their places at certain times in an economic cycle. I think the stimulus was necessary to stop the hemorrhaging in the economy and stabilize it the best way it could. I don't think the Neo-Classic view of tax cut after tax cut is the the answer in that regard, eventually you run out of taxes to cut or things the gov't doesn't do. A mix of both approaches at different times is what we need and have always needed. Certainly, the time to cut spending is upon us, especially when the recovery stabilizes. But I don't think it has to be a war between theories 24/7.
post #8 of 127
Quote:
Originally Posted by CBrown85 View Post
Wondering what a massive cut to your defence budget would do for your debt after ten years if you kept the same or lower taxes.

We would if the rest of the developed world started pulling their own weight.

well, maybe not. But I can dream.
post #9 of 127
Thread Starter 
Quote:
Originally Posted by Astan View Post
IMO its a bad idea to generalize with economic theory. Keynesian or Neo-Classical have their places at certain times in an economic cycle. I think the stimulus was necessary to stop the hemorrhaging in the economy and stabilize it the best way it could. I don't think the Neo-Classic view of tax cut after tax cut is the the answer in that regard, eventually you run out of taxes to cut or things the gov't doesn't do. A mix of both approaches at different times is what we need and have always needed. Certainly, the time to cut spending is upon us, especially when the recovery stabilizes. But I don't think it has to be a war between theories 24/7.

I don't think Keynesian spending has ever worked so it's pretty dead. The stimulus has not worked in terms of job creation. How can you say it was needed when there are no results to show for it?
post #10 of 127
Quote:
Originally Posted by Artisan Fan View Post
I don't think Keynesian spending has ever worked so it's pretty dead. The stimulus has not worked in terms of job creation. How can you say it was needed when there are no results to show for it?
IIRC, Keynesian economics isn't exactly about stimulus, but rather, stabilization. The stimulus, in effect, ended up just preventing widespread job losses, rather than creating more jobs. If you could revitalize the economy through government spending alone, that would be fantastic, but you can't simplify the situation like that.
post #11 of 127
I think both the neo-liberal consensus and Keynesianism are just about dead these days. Both look like awfully failed schools of thought.
post #12 of 127
Why do we still apply them then? Are the politicians just thinking that the possible boost in confidence will be enough to help?
post #13 of 127
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Originally Posted by phreak View Post
Why do we still apply them then? Are the politicians just thinking that the possible boost in confidence will be enough to help?
We don't have a better system of thought at the moment. We will, eventually.
post #14 of 127
Well the CBO estimates the stimulus pack saved or created 3.6 million jobs by the end of 2010. http://www.cbo.gov/ftpdocs/99xx/doc9...r_Stimulus.pdf <insert anti-CBO discussion here>. But even if you think the CBO isnt really reliable there are a myriad of stories that companies have been saved by gov't spending. Mark Zandi, one of McCain's old economic advisors, testified that the stimulus is working and that gov't dollars are more effective than tax cuts in stimulating economic growth. http://www.economy.com/mark-zandi/do...lus-102909.pdf I respect your opinion a lot AF, especially when it comes to cutting the budget. But I think the main problem was the underestimation of the seriousness of the problem. Econ advisor's to President Obama stated they believe the unemployment would not go below 8%, its almost 10%. Had they known that the stimulus would have been much larger and more effective. Also keep in mind, much of the sp was a large tax cut as well. So if the stimulus didn't work, what does that say about tax cuts?
post #15 of 127
Quote:
Originally Posted by Astan View Post
Well the CBO estimates the stimulus pack saved or created 3.6 million jobs by the end of 2010. http://www.cbo.gov/ftpdocs/99xx/doc9...r_Stimulus.pdf <insert anti-CBO discussion here>. But even if you think the CBO isnt really reliable there are a myriad of stories that companies have been saved by gov't spending. Mark Zandi, one of McCain's old economic advisors, testified that the stimulus is working and that gov't dollars are more effective than tax cuts in stimulating economic growth. http://www.economy.com/mark-zandi/do...lus-102909.pdf I respect your opinion a lot AF, especially when it comes to cutting the budget. But I think the main problem was the underestimation of the seriousness of the problem. Econ advisor's to President Obama stated they believe the unemployment would not go below 8%, its almost 10%. Had they known that the stimulus would have been much larger and more effective. Also keep in mind, much of the sp was a large tax cut as well. So if the stimulus didn't work, what does that say about tax cuts?
Didn't I already blow up the idea of using CBO or Moody's estimates for jobs created? They just multiply money spent by the estimates made pre-Stimulus from large aggregates of historical data. They have nothing to do with actual job creation. Even they admit that. It is garbage, no discussion necessary.
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