Debunking Keynesian Economics

by Sal on December 17, 2008

in Economy,Politics

As the Economic Crisis remains the main issue of the day, talk in Washington continues to revolve around a Keynesian stimulus as an attempt to “revive” the economy.  Dan Mitchell, of the Cato institute, has produced a YouTube video which clearly and concisely explains why Keynesian economics does not work.

The Obama plan is nothing but Keynesian Economics.  It creates infrastructure and provides public sector jobs, which will in the short-term employ people, but which will stifle economic growth and keep the economy down in the long term.  Economist Peter Schiff, President and CEO of Euro Pacific Capital, and one of the few who predicted the current economic crisis, has some choice words to say in an argument he had with a CNN talking head.

Economic crisis’ are solved not by redistribution of capital, but by rewarding success.  Cutting marginal tax rates, Corporate Tax Rates, and Capital Gains Tax Rates would reward hard work, corporate success, and investment.  This type of economic policy actually would stimulate the economy, not by gimmicks of giving away money or diverting the economy to more public-sector projects, but by stimulating the behavior of those hard working people who drive the economy.  The economy is not driven by spending, but by hard work.  By rewarding work, it creates an incentive for people to work harder to earn more.  When the government punishes success and “spreads the wealth around,” hard work is not seen as an attractive option, and the economy does not grow.

Keynesian economics has never worked when it has been tried.  The Hoover and Roosevelt polices of the Great Depression did nothing to end that economic crisis, and the Bush stimulus package of 2008  did nothing to stave off the current crisis, and another “stimulus” package will be equally as ineffective.  The people in Washington and the Media (as evinced by the CNN talking head in the above video) do not comprehend this simple fact that has been proven over and over again.  Maybe they need a lesson in economics.

H/T: National Post via Michelle Malkin

{ 5 trackbacks }

Obama’s Solution: “Only Government” Can Save Us | Axis of Right
January 8, 2009 at 5:39 pm
Stimulus Won't Stimulate for Years | Axis of Right
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More Dissension Over Stimulus | Axis of Right
January 28, 2009 at 8:03 am
At Least Australia Gets it Right | Axis of Right
February 13, 2009 at 6:42 am
Hunter Lewis on Stopping Keynesian Economics - Journey into the pit of truth
August 16, 2013 at 4:07 am

{ 3 comments… read them below or add one }

Arizona Mildman February 22, 2009 at 9:08 pm

A few months ago, the Cato institute representitive came on CNN and stated that Supply Side Economics (another fashion of trickledown which has caused our economy crisis) was the way out of our problems. Now Cato institute is complaining once again about Obama’s plan based on supply side economics instead of based on rational spending. This is the usual muddying the waters that economic speculators who don’t know what to say give you. No answer, just complaint. This is the conservative attitude. Don’t try it, we tried your way and it got us here. But now, for no reason other than to insist on NOT DOING IT SOMEONE elses way, they get in the way of progress by confusing the people who are undecided and don’t know enough about math to make a decision. Here is the way it is. As Susie Oreman says, you can’t spend more that you bring in. Educate the public, NOW, then, we also have two words that Obama’s plan handles nicely without respect to anyone’s ideology. It is (watch out how simple this is) two words, JOB CREATION. The other plan didn’t allow for that. The only way out of this is to WORK our way out and we can’t do that without jobs. Income tax breaks don’t do any good for people with no income because of NO JOB. The next time you take your family out to dinner wait until the bill comes and tell the cashier, “No problem, the government is going to give me a tax break. ” We need jobs and money today, not more talk. We can’t spend a tax break. We can’t support our families with tax breaks. Rich people who have enough saved that no financial crisis will ever effect them because they can live on their savings better look at the fact that the last couple of decades we were living on credit waiting for a tax break. When the tax break came it was already built in because the credit expenses were so great that we owed MUCH MORE than that amount of money because the cost of living went WAY UP. I know Republicans complain about “Big Government” and “Less Regulation” but that doesn’t allow for unlimited greed. The same people we are bailing out have been raping us for a while with not even a scolding from the FDIC, the FTC or any other of the agencies that were supposed to be monitoring, not regulating, the lending agencies and the housing market. Unlimited greed caused us to have two income families and house prices that are so outrageous that NO ONE can afford a house if they don’t make 100, 000 a year. No one cares that the lenders were predatory as they upped the market and stood for how much they told people that they could afford. I think speculators are the biggest problem in the U.S. either in the stock market or the economy. Show me how doing nothing, which is what your stimulus package amounts to, is going to help or shut up. You need to pick a side, and as President Obama said, “I don’t really think I need to ask advise from the same people who spent eight years srewing things up.
The article about Economics in One Lesson by Henry Hazlitt has a subtitle. It is something the Republicans fear like no other phrase; The Lesson Applied
Public Works Mean Taxes.

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Arizona Mildman February 22, 2009 at 10:08 pm

I am sorry, I have one more comment now that Dan Mitchell switched direction in midstream, which is, yes, you are right this time, and that is what the supply side economics freaks at the Cato Institute seem to be missing. We, the people who it effected have been telling you that based on actual economists findings for the past seven years. You people are one of the main examples that the Keynesian economists pointed to as their educated authority figure who supported supply side economics. The Cato Institute is who the Republican Politicians who believe in supply side economics quote. Now that these theories are publicly being torched, then, all of a sudden the Cato institute minions are trying to be the bastions of regular pre-Reagan economics. Now they have a real economist on here to suppy some facts. Here is Mr. Schiff’s comment: “Economic crisis’ are solved not by redistribution of capital, but by rewarding success. Cutting marginal tax rates, Corporate Tax Rates, and Capital Gains Tax Rates would reward hard work, corporate success, and investment. This type of economic policy actually would stimulate the economy, not by gimmicks of giving away money or diverting the economy to more public-sector projects, but by stimulating the behavior of those hard working people who drive the economy. The economy is not driven by spending, but by hard work. By rewarding work, it creates an incentive for people to work harder to earn more. When the government punishes success and “spreads the wealth around,” hard work is not seen as an attractive option, and the economy does not grow.”

This is all correct so trying to continue to spend money at an incredible rate is insane. Also, thinking that nothing comes from giving money to America is hard for me to understand. Let me see, who would we give it to, the banks who have basically tried to rob us. A loan or a credit card becomes like using a loan shark. Interest rates which are applied after the original contract has been changed by the bank is about as legal as me saying I don’t have to pay income taxes any more or saying that I don’t need to pay my bills. For anyone to change a contract is supposed to be illegal, but the deregulation of our banks has led to them financially violating us and our rights have been the downfall of the industry. Not only did many Americans act like credit was free money but the banks turned the bad credit debt of some into the interest rates of the rest of us, but they don’t bother to create enough money or credit to keep jobs flowing. Meanwhile they think they deserve big raises and bonuses. This is the same people who don’t think they need to have a regulation. The main reason is UNLIMITED GREED. Also, if they didn’t give credit to people who don’t know how to handle it or can’t pay it back, they wouldn’t be in a financial crunch that we see now. The matter that most of the U.S. money was only on paper is the real crime. So, printing more money is wrong but if we don’t we will be seeing how bad this depression is, instead of forestalling it publicly the way we have been.
I am tired of the expression Hillary Clinton made famous, “redistribution of wealth”. This is what was meant by that. Republican drones would have you believe that means taking money from someone else’s bank account and giving it to welfare mothers. (I know, it makes me want to laugh until I am in tears how transparently stupid that statement is.) What it means is not allowing a certain group of wealthy people who have been making money from the middle class without returning anything, including benefits, in their redistribution of the wealth of this country in the hopes of their anticipated unlimited wealth. Why not turn the United States into a third world country so that the rich and unscrupulous can continue to find as cheap of labor as possible. If it were up to people like Rush Limbaugh we would be returning to slavery so he and the rest of the financially advantaged can continue to deconstruct America and it’s middle class until everyone is below the poverty level and can’t have a say in how much they make. When we have people working for 20 dollars a week like in other countries like Mexico, then, we will live like they do in Mexico. They risk their lives running across the border to avoid living like they do there. No health care, no progress, no savings, no education for anyone’s children but the elite. Then, when our country is completely deconstructed, they will finally be happy. It will keep them feeling elite. We all know how important that is to eliteists. They don’t need more money or property but it makes them feel superior. If that is what you want, continue to listen to the conservative talk radio hosts and the conservative economists who are constantly trying to stall all progress in our economy.

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A. Mitchell March 16, 2009 at 8:20 pm

Anyone who thinks that the crisis we’re in today is simply about Bush or Obama would do themselves a favor by watching this:
http://www.youtube.com/watch?v=N5YCuRnkby4

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