When Has Ideology Trumped History?

Obamas Keynesian American Experiment

Last night on his sixty-third day in office, the President proved he could take powder puff punches from the press as he played rope-a-dope in front of the American public.  He had to be in the public ring because the American’s are not buying into tax and spend redistribution of wealth proposals he and his team are putting forth.  He answered reporters’ questions and knew details of programs.

What he did not do, and it appears everyone missed this, is explain why this Keynesian economic program will work?  Keynesian economics like liberalism from which it takes its principals has never worked.  What President Obama and his team are attempting to do is make private enterprise into non profit entities with salary caps for the executives and mass unionization for employees.  How do you expect this economic model to succeed Mr. President?  Oh, no one asked him this question!

I am sick and tired about hearing the ambitious agenda President Obama is proposing, when there is no thought as to how or why it will work.  Government is a parasite that cannot survive without business.  Yet government spends more money than business is capable of producing and it is borrowing from future generations to implement this socialist agenda to make it happen.

Unless the full capability of the American capitalist is unleashed there can be no recovery.  President Obama promises to cut government programs that are not working but how can a tiger change its stripes?  He is implementing Keynesian economic theory as an experiment when America needs a proven strategy that has worked in the past.

Lets take a look at the Keynesian economic theory:

During the Great Depression, classical Keynesian theory defined economic collapse as lost incentive to produce and unemployment was caused only by high non-adjustable wages.  Keynes, will resist wage reductions.

If wages and prices are falling, people would obviously expect them to fall. The Public’s perception of the economy spiraling downward would cause those who had money simply wait as falling prices made it more valuable-rather than spending. Deflation would make normal debts more valuable as the price of the dollar would rise.

Keynes contended that demand for goods might be insufficient during economic downturns, leading to unnecessarily high unemployment creating a loss of potential output. Keynes argued that government policies could be used to increase aggregate demand, thus increasing economic activity and reducing unemployment and deflation.

Keynes’s theory suggested that active government policy could be effective in managing the economy. Rather than seeing unbalanced government budgets as wrong, Keynes advocated policies which acted against the tide of the business cycle.  Namely deficit spending when a nation’s economy suffers from recession when recovery is long-delayed and unemployment is persistently high-and the suppression of inflation in boom times by either increasing taxes or cutting back on government outlays.

Keynesians policies peaked in the 1960s, when it seemed to many that prosperity was now permanent. However, the economic problems of the 1970s, this modern liberal economic theory fell in disfavor. During this time, many economies experienced high and rising unemployment, coupled with high and rising inflation; Keynesian theory had no solution for this complex  economic problem. The government application of free market incentives by deregulation promoting anti-recession, anti-inflation, debt abhorrence policies appears to be contrary to Keynesian policy. This dilemma led to the end of the Keynesian near-consensus of the 1960s, when the economy entered stagflation with high gasoline prices of the 1970′s.

The application of Keynesian policy has never been tried during a recession/depression its tenants only work during boom times and it may be the root cause of recession which is why it was proven not to work just 40 years ago in America.

Last night on his sixty-third day in office, the President proved he could take powder puff punches from the press as he played rope-a-dope in front of the American public.  He had to be in the public ring because the American’s are not buying into tax and spend redistribution of wealth proposals he and his team are putting forth.  He answered reporters’ questions and knew details of programs.

What he did not do, and it appears everyone missed this, is explain why this Keynesian economic program will work?  Keynesian economics like liberalism from which it takes its principals has never worked.  What President Obama and his team are attempting to do is make the private enterprise into non profit entities with salary caps for the executives and mass unionization for employees.  How do you expect this economic model to succeed Mr. President?  Oh, no one asked him this question!

I am sick and tired about hearing the ambitious agenda President Obama is proposing, when there is no thought as to how or why it will work.  Government is a parasite that cannot survive without business.  Yet government spends more money than business is capable of producing and it is borrowing from future generations to implement this socialist agenda to make it happen.

Unless the full capability of the American capitalist is unleashed there can be no recovery.  President Obama promises to cut government programs that are not working but how can a tiger change its stripes?  He is implementing Keynesian economic theory as an experiment when America needs a proven strategy that has worked in the past.

Lets take a look at the Keynesian economic theory:

During the Great Depression, classical Keynesian theory defined economic collapse as lost incentive to produce and unemployment was caused only by high non-adjustable wages.  Keynes, will resist wage reductions.

If wages and prices are falling, people would obviously expect them to fall. The Public’s perception of the economy spiraling downward would cause those who had money simply wait as falling prices made it more valuable-rather than spending. Deflation would make normal debts more valuable as the price of the dollar would rise.

Keynes contended that demand for goods might be insufficient during economic downturns, leading to unnecessarily high unemployment creating a loss of potential output. Keynes argued that government policies could be used to increase aggregate demand, thus increasing economic activity and reducing unemployment and deflation.

Keynes’s theory suggested that active government policy could be effective in managing the economy. Rather than seeing unbalanced government budgets as wrong, Keynes advocated policies which acted against the tide of the business cycle.  Namely deficit spending when a nation’s economy suffers from recession when recovery is long-delayed and unemployment is persistently high-and the suppression of inflation in boom times by either increasing taxes or cutting back on government outlays.

Keynesians policies peaked in the 1960s, when it seemed to many that prosperity was now permanent. However, the economic problems of the 1970s, this modern liberal economic theory fell in disfavor. During this time, many economies experienced high and rising unemployment, coupled with high and rising inflation; Keynesian theory had no solution for this complex  economic problem. The government application of free market incentives by deregulation promoting anti-recession, anti-inflation, debt abhorrence policies appears to be contrary to Keynesian policy. This dilemma led to the end of the Keynesian near-consensus of the 1960s, when the economy entered stagflation with high OPEC gasoline prices of the 1970′s.

The application of Keynesian policy has never been tried during a recession/depression its tenants only work during boom times and it may be the root cause of recession which is why it was proven not to work just 40 years ago in America.