I watch Morning Joe as I prepare for work everyday, because I think they cover both sides of the story fairly well. However, I do not listen to MSNBC’s evening programs because I cannot follow the lack of brains most of their hosts have on the far liberal side.
We’ve spent more money than at any time since WWII on recovering this economy. Liberals are wanting to ignore the problem of deficits and risking destroying our dollar’s global strength, and want to increase our spending for more “stimulus.” Yet, we’ve seen that while the stimulus we have done has saved 2.4 million jobs (at least in the short term), it did it very inefficiently. It cost $278,000 for each of those jobs! Had we cut checks for $50,000, we could have taken care of 5 times as many people and still saved tens of billions of dollars.
Retirees love Medicare. And it works well for them. However, it also wastes hundreds of billions of dollars every year. Federal government is inefficient. For every inefficient dollar it wastes, it has taken a dollar out of the economy that small and big businesses could have used to create real and efficient growth.
Amazingly, Morning Joe had all liberals on their program this morning, and several insisted that we needed to return to Keynesian economics to save the economy. Are they serious? Doesn’t the current numbers show that the money government “invests” is inefficient, wasteful, and altogether short term in its value? While there was lots of stimulus going into the system, jobs were temporarily created. Now that the stimulus is mostly used up, we return to reality. All we are doing is extending the recession. We are not allowing the economy to reset, and so allow a real growth to occur afterward. That is why we are again at 9.2% unemployment with anemic numbers again.
We are following in the footsteps of the Japanese during the 1990s. It won’t work.
It is time to let freedom work. Get the feds out of the environmental regulations, business regulations, education, etc. We are allowing the feds to bring our economy down. It is time to stop and return to freedom.
It is amazing what people can believe when their livelihoods depend believing it.
Yes, big government requires ever bigger inflows of money.
California education used for a decade a system of memorizing words instead of other programs, such as phonics or a combination using phonics. Sadly, when kids memorize words through school, they learn at most a few thousand words (and that’s if they remember them all). They ended up with 1/2 a generation of illiterate kids. Finally, they went to a combination program, which significantly raised the reading ability and lowered the cost of teaching literacy by over half. The creator of the program stated that he was not surprised it did not work, because they had not spent enough money on it.
Big government concepts ruin lives. I know dozens of examples like that.
The answer to the question in the headline of your post is: it is time for us to admit Keynes was very, very wrong.
Government generally does a poor job in creating economic growth through spending.
But, we have had successes in the past: The Homestead Act and the policy on railroads come to mind.
The Homestead Act put federal property in private hands but required individuals to improve and occupy the property for 5 years before they could get title.
Railroads were critical in tying our country together and boosted economic activity. The key was that the federal government encouraged railroad development by allowing a railroad company to claim every other section along the line. The railroads would then sell that land off. These created a strong incentive to build railroads in the first place.
The common element of both programs is that both provided strong incentives to engage in economic activities that boosted the economy. But, the federal role was relegated to providing the initial incentive and the government didn’t tell railroads where to build (even the transcontinental line specified beginning and ending points) or what to do once things were built. But, at its core, these efforts created new opportunities that pushed our country forward.
Today, the space shuttle took off for the last time. Space is the one area that the federal government can focus on.
Private companies are working hard to get the U.S. back into space. But, that really is only the beginning.
The Moon is only three days away. Its surface consists of titanium, iron, and manganese. It has water at the South Pole (and maybe across the surface). Meteorite strikes have littered its surface with platinum. The keys for development are, first, defining property rights. If one stakes a claim, how much surface area does one get? Right now international treaty says no one can claim land on the Moon. The US needs to change that. The Moon could be a base for further exploration of the solar system. Water allows for the production of fuel. Another possible industry is mining platinum reserves. If we could tap the Moon’s reserves, we could build fuel cells to run vehicles. These take hydrogen and combine it with oxygen, excluding water. That may be a path away from oil.
That is just the beginning. Asteroids contain more metal than ever mined on Earth. Comets have vast reserves of water and other volatiles. Space development could reduce the demand on Earth resources and provide a place for our population to expand.
The federal government’s role should be to define property rights, encourage innovative research, continue exploration (time for Mars!).
I agree there is a place for government. Eisenhower’s highway system has increased commerce, for example.
Still, these initiatives should be done carefully, and without over-regulation, etc.
Liberals have often sneered at conservatives and libertarians for thinking small government is the way to go. They thought Reagan was an idiot. However, his conservative efforts created the longest lasting period of economic growth in US history, and that was true even with working with a Democratic Congress.
Whether the president is Barak Obama or GW Bush, Keynes’ ideas are not working. And the sign of insanity is to keep trying to do the same thing and expecting a different result. Keynes’ followers are the real idiots for not recognizing what the data actually shows.
Agreed. John M Keynes along with Malthus are my two least favorite economists of all time. Bring on the invisible hand and the free market. Long live Adam Smith!
Joyce, in our time, long live von Mises, Hayek and Friedman!
Rame, the government should have outsourced the federal highway system. Let me give you an example. Today, when the government wants internet connectivity between Washington and Pakistan or even Washington and New York, what does it do? It puts out an RFP and gets the lowest-cost provider. The same thing should have been done with the federal highway system. Put out an RFP, see who can build certain sections at the lowest cost and let the providers make money off of tolls. Private toll roads are cleaner and cheaper (in the long run) than public highways. People forget they are paying several dollars in gas taxes every time they commute to work. These gas taxes go to build roads. So the roads are not “free” — they are included in the cost of the gas. Get rid of the gas taxes and let people pay when they actually use the roads through an electronic toll system. There is no reason why the freeway to the airport (which I use all the time) should be paid for by somebody who never uses that road.
Keynes was not wrong per se. It’s just that he comes with serious unintended consquences, especially if you decided to Keynes your economy forever like we did.
Bruce N, I think that’s a decent point. Keynes called for short-term stimulus at key moments, and we have basically been long-term Keynesians for the last 40 years, and Keynes never called for that. The problem is that Keynes provided political cover for big government ideas that politicians (of both parties) love. They could always claim that the new spending program was a “stimulus” while they handed money to big donors, friends, etc. This is why the Austrians were ultimately correct in calling for market clearing, sound money and free-market policies to help through the inevitable downturns, rather than allowing yourself to be seduced by stimulus.
Bruce, of course you are right that Keynes focused on short term activity. However, Keynes’ work with FDR lasted for years, and he didn’t seem to mind that FDR instituted government programs that were built to last forever (like Social Security). This is an inherent danger in big government, regardless of whether one quotes Keynes or not: that the government will suck up more and more of the economy (now at 25% of GDP).
Geoff, I agree there are better ways Eisenhower could have built the roadways. Here in Indiana, a major state road was turned into a toll road and then leased to a private company. It turned Indiana from owing hundreds of millions of dollars in debt, to being over $1 Billion in the black. This happened just before the Great Recession began, so we are doing okay in this state. I have no problems with private toll roads.
As I’ve noted before, government can do some things that the people like, but extremely inefficiently and with a penchant towards creating massive, never ending programs.
“Had we cut checks for $50,000, we could have taken care of 5 times…”
Be careful, you just might get what you’re wishing for. This round of horribly inefficient stimulus will most certainly take your suggestion in mind and create what could be an even worse, but more successful stimulus the next time around. What I mean is, the whole, “we could have just done XYZ with the money” basically yields the point that the government should be spending that money in the first place.
Just imagine some enterprising politician deciding to give $1000 per month to every business who jumps through some hoop and hires an employee under the 2012 Employee Stimulus Act. They’ll be able to credibly argue that they created or saved 10 million jobs pretty quickly. Except for the conditions they create will be even worse and the economic distortions far more severe.
I’m not saying you’re suggesting this by any means, but you can see it in the not-too-far-off future. They will say, “Just give us another chance to get it right, are you so heartless to do nothing? We have to try something.”
The worst kind of inefficiency is the one that creates those unknown unknowns and distortions that you can’t even see or argue against. Then it will be you and your (correct) phantom theory of economics arguing about “how good the economy should be if only we could stop directly funding the employment of 10 million people.” Good luck persuading anyone against that! Unfortunately, I don’t know what can really be done to prevent any of this because it’s no longer a liberal/conservative thing as not only are they are all micromanagers, but more importantly the electorate is and they will vote for what they expect.
Chris, you are absolutely correct. I am not advocating the government doing anything of the sort. I want the federal government to shrink to about 10-20% its current size, and reduce federal regulation by at least 50%.
In doing this, we’ll see a huge jump in business growth. Companies will move to the USA to start up manufacturing, etc., because our nation will not hold any threats to them doing business here. And as they make money, they can expand and hire more people.
Rameumptom, #5,
However, his conservative efforts created the longest lasting period of economic growth
This is where you are losing me. I think it is fair to say that the biggest feature of RR’s economic program consisted of massive and historically unprecedented deficit spending. In the 8 years of his administration, the U.S. went from being the largest creditor in the world to being the world’s largest debtor nation. He tripled the national debt. In what sense can this be understood as conservative? Given these facts, which I trust you do not dispute, and given that the economy did boom under RR, isn’t that more an argument in favor of Keynesian economics than against?
Mark Brown, there are many of us who coming around to the realization that RR used some Keynesian methods and that they did indeed cause temporary stimuli, and that those stimuli are partly responsible for the mess we are in today. The Austrian theory is that fiat currency (which we have been on since the 1970s) will always result in bubbles and then bubbles will pop in unpredictable ways but will always pop. Thus, the 1991-92 recession (first Bush didn’t expect it), the dot.com bubble and recession and then the housing boom and bust that we are still suffering from. The Austrians believe the pressure will build and each bubble will be worse than the last, which also has proven true. This is one of the reasons that if you add the stimulus from TARP, the bailouts and the Fed money printing we are approaching $4 trillion in stimulus and it is having no real effect. We are stuck at 9.2 percent unemployment and inflation is rearing its head as well. You can prime the pump anymore: there is only one way out, which is a drastic decrease in the size of government.
I think most people intuitively know we can’t continue deficit spending forever without it having some horrible ending. Many people don’t want to admit this because they see it affecting the poor in negative ways. Nobody wants to throw grandma off of Medicare and Social Security. But there are ways of dealing with the problem that would not cause that result, like tackling entitlement reform now in ways that will make these programs sustainable. If the Austrians are right (and I think they are), the next bursting bubble will be much worse than the 2008 one, and it will happen sometime soon. If they are right, then there be no real choice than massive cuts in entitlements and many other programs.
My guess is we will find out in the next few years because the debt ceiling will be raised with token cuts. This means the next bubble will continue building.
Great article on this subject:
http://dailycaller.com/2011/07/09/economist-veronique-de-rugy-on-debt-debate/
Geoff,
That IS a great article. Too bad 98% of those in Washington DC are illiterate, and spend their education time watching Paul Krugman on Saturday morning cartoons….