Obama, the Unwavering Keynesian

 

Regardless of whatever else one may believe about President Obama and his motives for advancing an agenda that is bankrupting the nation (Cloward-Piven, committed Marxist, garden-variety statist, etc.), I am convinced that he is a die-hard Keynesian. His faith in this failed theory is so strong that he cannot digest empirical evidence disproving it.

Leftists like Obama, who fashion themselves as open-minded and academically curious, are largely indoctrinated with liberal revisionism in history and economics and reinforce their myths and errors via echo chamber by limiting their intellectual interaction to likeminded colleagues. They are further intellectually burdened by their emotional commitment to redistributionist policies, from which they seem to derive their sense of self-worth.

Their worldview dictates that large-scale redistributionism (and that’s putting it mildly now that we’ve seen them in action with control of both political branches) is not only morally imperative, but creates prosperity as well. I know, I know, Obama admitted for a moment to Charlie Gibson that he favored increases in capital gains tax rates “as a matter of fairness,” even knowing such increases reduce revenues. But in his heart of hearts he really believes that socialism can work – that confiscatory taxes do not shrink the pie – as evidenced by his recent absurd remark about the wealthy not being deterred from spending money (e.g. buying flat-screen TVs) with increases in marginal income tax rates.

So when socialism doesn’t work anywhere in the world, leftists rationalize that it hasn’t been properly implemented or distort the data to suggest that it does work. And when it doesn’t work in the United States, they always blame the market, not government intrusion.

It’s a recurring pattern: they force government intervention in the market, completely mess things up, scapegoat the excesses of capitalism, greedy capitalists, and “deregulation,” and then demand yet more government. The subprime meltdown and our experience with healthcare are two recent egregious examples.

These committed Keynesians are impervious to evidence suggesting that New Deal spending exacerbated rather than ameliorated the depression. They are oblivious to what Heritage Foundation Senior Fellow J.D. Foster calls the “simplest of realities: Government spending must be financed. So to finance deficit spending, government must borrow from private markets, thereby reducing private demand by the same amount as deficit spending increases public demand. In effect, the theory says that if I take a dollar from my right pocket to my left, then I’m a dollar richer. No wonder it always fails.”

Obama was so convinced that Keynesian pump-priming would work to “jump- start the economy,” that he promised that if implemented, his stimulus package would keep unemployment from exceeding eight percent. (Neither he nor his Keynesian brain trust ever bothered to explain how the nation could afford an extra $1 trillion in debt even if his spending would have worked, but that’s another subject). Though unemployment jumped above ten percent and has hovered between nine and ten percent ever since, there is no indication that Obama’s blind faith in Keynesian is remotely shaken. That’s why he can tell us with a straight face that he wants $50 billion more for infrastructure to create jobs when $868 billion (not all of which has yet been spent) did not make a dent in the unemployment rate. You see, he doesn’t accept that his stimulus package didn’t work. All the evidence indicates it was a miserable failure. But he has something better: his economic theory says it must have worked, therefore it did.

How many times have we heard him make the unprovable assertion that without the stimulus, things would have been much worse or that because of his spending we averted another Great Depression? His illustrious sidekick Joe Biden applies a different spin: “The Recovery Act didn’t do enough because we couldn’t spend enough.” For these people enough is never enough. Heritage reports that since Obama’s term began federal spending is up more than 21% and the national debt has risen by $2.9 trillion.

If all this weren’t bad enough, Obama is in the process of further destroying any prospects for growth by saddling our economy with the largest tax hike in U.S. history, according to Heritage. “Taxes on individual income, capital gains and dividends are all set to rise.”

In his little Marxian bubble, Obama believes that punishing the wealthy will not harm the economy as a whole, as another article of the leftists’ faith is that trickle down growth or constriction is a construct of evil corporatists and capitalists.

In the end it really doesn’t matter much whether or not Obama is deliberately trying to harm the economy because his reckless agenda is destroying the economy and bankrupting us irrespective of his motive.

Which is all the more reason his band of congressional enablers must be ousted in a few weeks.

There are 22 comments.

  1. Inactive

    Who was it who said that Liberals of Obama’s stripe live in a completely shuttered a priori universe? I can’t remember, but that about sums it up. In their minds, their theory is correct, its just another botched implementation.

    • #1
    • October 12, 2010 at 9:09 am
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  2. Inactive

    To Obama and his ilk the true sin of American capitalism is income disparity (which is also equated with racism).

    Their policies are intended to reduce the gap between the greedy rich and the oppressed poor.

    But instead of shrinking the gap, they end up ratcheting the entire structure downwards, with the net effect being that the rich are still rich – though not quite so rich as before – while the poor descend into record levels of poverty and dependance.

    • #2
    • October 12, 2010 at 9:17 am
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  3. Contributor

    Unwavering Keynesian or just completely economically illiterate? (Or are the two perhaps synonymous?)

    • #3
    • October 12, 2010 at 9:28 am
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  4. Founder

    Great post, David. But what astonishes me is that we’ve just conducted the most thorough experiment in Keynesian economics ever conceived. That $1 trillion in stimulus — along with every other kind of bailout — was nothing if not a good faith application of the theory that deficit spending in bad times can act as a counter-cyclical balance. And it failed. So now we know: Keynes was wrong. Utterly and totally.

    Except, apparently, we don’t know. Or at least the brain trust in Washington doesn’t. At this point, though, even lab rats get the picture: if you push on the lever, you get an electric shock. So don’t push on the lever.

    • #4
    • October 12, 2010 at 9:34 am
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  5. Contributor

    Rob Long:

    Except, apparently, we don’t know. Or at least the brain trust in Washington doesn’t. At this point, though, even lab rats get the picture: if you push on the lever, you get an electric shock. So don’t push on the lever. · Oct 12 at 9:34am

    No, the lesson is that it didn’t work; it’s that we didn’t spend enough. If only we’d spent more, the Krugman counterfactual narrative goes, then we wouldn’t be in this mess. That’s certainly one way to avoid ever being held accountable for failed ideas…

    • #5
    • October 12, 2010 at 9:45 am
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  6. Member

    Keynesian economics (at least as it’s interpreted by politicians) is an endless cycle of “fixing” past mistakes by repeating them.

    • #6
    • October 12, 2010 at 9:46 am
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  7. Thatcher
    Rob Long: … Except, apparently, we don’t know. Or at least the brain trust in Washington doesn’t. At this point, though, even lab rats get the picture: if you push on the lever, you get an electric shock. So don’t push on the lever. · Oct 12 at 9:34am

    Except that they have a Nobel-laureate economist yelling “Hit it again, hit it again, harder! harder!” and we are the ones feeling the shocks

    • #7
    • October 12, 2010 at 9:49 am
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  8. Coolidge

    I’m telling you, the really nasty part of the Bush tax cuts expiring will be the negative effect it has on small business because of the huge increase in rates for dividend taxes.

    When most people hear dividends they think of the money you get every year on shares of stock you hold in public companies. However, most small businessmen like myself have S-Corps or LLCs and most of our income is dividend income from our S-Corp, not salary.

    The reason we do this is for the tax benefits – you don’t pay SS tax on dividends and until Jan 2011 the rate is only 15%. You may think this unfair but we are the ones taking the risks and generating jobs; Bush and his economic team understood this which is why they cut the tax rate on dividends.

    Net-net is that taxing dividend income like regular income will cost small business people tens of thousands of $$ in new taxes – money they will not be able to use to hire or expand their business. And believe me it will hit small business people making far less than $250k a year plenty hard!

    • #8
    • October 12, 2010 at 10:05 am
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  9. Inactive

    You appeal to Foster’s theory; (he’s correct) in one paragraph and then say increasing the tax rate will destroy any prospect for growth. Raising taxes and spending the money, which he surely would, is the problem. M. Friedman argued the spending rate is the tax rate. I have no hope that the Democrats will ever realize this. My problem is I think the chances that the GOP will are only slightly better. Please note the number of GOPers present when he made his latest spending announcement.

    • #9
    • October 12, 2010 at 10:12 am
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  10. Inactive

    The argument now is that it didn’t work because it wasn’t big enough, or as Krugman says, it wasn’t even tried at all.

    Arnold Kling over at EconLog calls this type of thinking government fundamentalism:

    A government fundamentalist is someone who thinks that governments never produce bad outcomes, unless they lack resources or power. In general, government fundamentalism is irrefutable. If public schools fail, the government fundamentalist says that it is because the schools lack resources. If financial regulation fails, the government fundamentalist says that is because the regulators lack power.

    • #10
    • October 12, 2010 at 10:13 am
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  11. Contributor
    David Limbaugh Post author
    Diane Ellis, Ed.: Unwavering Keynesian or just completely economically illiterate? (Or are the two perhaps synonymous?) · Oct 12 at 9:28am

    Diane: This is an interesting question. As I (and Rob and others) are saying, Keynesian econ simply doesn’t work, but it didn’t work in the ’30s either and the die-hards rejected the evidence. They even wrote history and economic textbooks saying it did. That’s what I was referring to in the post. As a freshman in college in ’72 I remember one of my history profs saying that FDR was a conservative because he saved capitalism with his pump-priming Keynesian make-work insanity. For if he hadn’t implemented that agenda, the republic would have expired and capitalism would have been forever discredited and relegated to the dustbin of history. Imagine the left’s capacity for self-delusion, let alone delusion of others. Same thing with economics, which I minored in. After the failure of the New Deal — economically speaking — Keynesian theory dominated macro-economics textbooks. They taught the multiplier effect of the expenditure of government money, the supposed necessary trade off between unemployment and inflation (The Phillips Curve) and the rest. More …

    • #11
    • October 12, 2010 at 10:31 am
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  12. Contributor
    David Limbaugh Post author

    Continuing from my previous post, to answer Diane’s question directly: No, unwavering Keynesianism is not synonymous with economic illiteracy, because economic academicians, except perhaps for the Chicago school, supply siders, etc., still preach this stuff. So if they, as the academic elite, establish the standards of economic literacy and they say Keynesian theory still holds, then those who still subscribe to it aren’t technically economically illiterate, but the Keynesian dogma they preach is nonetheless fallacious.

    • #12
    • October 12, 2010 at 10:32 am
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  13. Inactive

    I don’t see how a leftist could not be a Keynsian. The rejection of Keynsianism and the adoption of the alternative model–free market economics as envisioned by people like Mises, Hayek or Friedman–would mean the rejection of the left’s fundamental belief in government interventionism.

    • #13
    • October 12, 2010 at 10:50 am
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  14. Contributor
    David Limbaugh Post author

    I agree, Peter. This also ties into another point I tried to make in the post about leftists deriving their moral self-worth partially from their advocacy of giving YOUR money to the poor through the coercive power of government and patting themselves on the back for their generosity. They cannot abide the reality that free markets produce more for all income groups because, among other things, it deprives them of one of the primary building blocks of their self-concept, i.e., generosity, magnanimity and philanthropy with other people’s money. And this also ties into tms5018’s excellent point about government fundamentalism in that libs don’t like true charity — that emanating from the voluntary choice and sacrifice of the individual in the private sector because it interferes with their government fundamentalism. That’s why Obama is amending the tax code to further discourage private charitable giving. The left’s thinking is so consistently warped…

    • #14
    • October 12, 2010 at 10:59 am
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  15. Member

    Would it have been easier, more efficient, and cheaper if the federal government just hired all the unemployed at “a living wage[?]” We would have 0% unemployment and would have saved money.

    • #15
    • October 12, 2010 at 11:14 am
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  16. Inactive

    “We will not have any more crashes in our time.” – John Maynard Keynes in 1927

    • #16
    • October 13, 2010 at 3:06 am
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  17. Inactive

    I have often said that Christians should be ashamed when in the presense of liberals.

    Jesus admonished the Christian to exhibit the ‘faith of a mustard seed.’

    Yet it has been my experience that a liberal will regularly exhibit the ‘Faith of an Avacado Pit’ in the face of every initiative they support that fails.

    • #17
    • October 13, 2010 at 4:38 am
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  18. Inactive

    Remember the Rick Santelli tea party rant? Perhaps the best part of the rant was when he demolished the entire premise of Keynesianism with this simple one-liner:

    “… and if the “multiplier” that all of these Washington economists are selling us is over “1”, then we never have to worry about the economy again. The government should just spend a trillion dollars an hour because we’ll get $1.5 trillion back.”

    • #18
    • October 13, 2010 at 5:41 am
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  19. Member
    David Limbaugh, Guest Contributor: And this also ties into tms5018’s excellent point about government fundamentalism in that libs don’t like true charity — that emanating from the voluntary choice and sacrifice of the individual in the private sector because it interferes with their government fundamentalism. That’s why Obama is amending the tax code to further discourage private charitable giving.

    It’s a testament to the beauty of human nature that tyranny can undermine but never destroy the impulse to be charitable.

    Many organizations are struggling for donations right now. But millions of taxpayers still consider charity a duty, rather than a frill, and have made concessions in their comforts so they may continue giving.

    • #19
    • October 13, 2010 at 12:12 pm
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  20. Inactive
    David Limbaugh, Guest Contributor: No, unwavering Keynesianism is not synonymous with economic illiteracy, because economic academicians, except perhaps for the Chicago school, supply siders, etc., still preach this stuff. · Oct 12 at 10:32am

    Don’t underestimate how expansive the Chicago school has become. Despite the efforts of Keynesian illuminati like Paul Krugman, economics remains a relative bastion of conservatism in the world of academe. Economics is a science, and like the hard sciences, its theories are subject to invalidation by evidence. And, in my opinion as a lowly graduate student, the field is becoming more laissez faire.

    • #20
    • October 13, 2010 at 12:19 pm
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  21. Inactive

    For my mind we’re attributing more conscious, reasonable thought to the current administration than actually exists. There is a deeply held petty grudge against all things “not-like-me” that guides everything they do.

    Having said that, the administration will never admit failure, because in their minds it never can fail. Ever. The only reason Keynesianism hasn’t worked before is because no nation was wealthy enough to pull it off. They believe we are wealthy enough–we just need someone as determined as the O to “stay the course.”

    • #21
    • October 13, 2010 at 12:31 pm
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  22. Member

    Peter, there are collectivists who reject Keynesianism in favor of Marxian economic theories. There’s little difference in terms of essentials, but there’s a distinction. And the Austrian school is easily the most scathing opponent of the Keynesian school.

    • #22
    • October 13, 2010 at 12:56 pm
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