Oh How Many Times Must We Repeat IT?

KeynesianSorry, I’ve been away for so long. That person writing all that stuff about Ford, and food, and happiness? Oh she is just a lonely soul looking for a place to land.

No seriously, I am getting dangerously close to violating the first law of blogging–keep to your topic! This blog (as you know I have others) is devoted to politics first and foremost, though I occasionally slip off into something tangential. The Ford stuff is arguably that and belongs here, but some of the rest?– just a necessary break from the ongoing “they are so stupids out there,  I might pull the last hair from my head” diatribe that engages me so much of the time.

In other words, I just got bored with the same crap!

So in face of two facts, one that the economy constricted the last quarter, and that the jobs numbers are pretty good and all the internals seem good but for the constriction of government spending last quarter, I got the usual jabs from the Right–how’s that Obama economy doing now? Our economy CONSTRICTED, the sky is falling! Well, not quite. Actually it rather proves the point that people like Krugman make–cutting spending will send us back into recession.

Now, I am not an economist, but I’m reading a lot of stuff, and I’m trying to understand all this it. Let’s look at things in simplistic terms, but in illustrative terms still. Keynesian economics basically call for government intervention to stave off bumps in the economic road. When there is a slow down, the government pumps in money (stimulus) and cuts taxes. When the economy is booming, it doesn’t and it raises taxes. It tries to keep things going smoothly.

A recession is basically caused (in its simplest terms) when some people stop spending money and start holding on to it. Since they are not spending, others have less income, forcing them to buy less as well. The economy slows, and so on. So spending money is the traditional way out of a recession.

Now let’s look at the Republican model.

  1. Republicans want to cut taxes, which admittedly fits into the Keynesian model.
  2. They want to cut regulations to free businesses to operate more cheaply presumably (it always comes down to money) without having to meet standards imposed upon them not by market demand but by government.
  3. They want spending cut especially as to social programs which they consider a waste of money, giving people the idea that they don’t have to get a job ( support business interests) and EARN their own money. But spending cuts shouldn’t occur in the military budget (which supports all those military supply business interests).

Let’s look at the Republican model in action:

In 2001, Bush sponsored a huge tax cut. Everybody got a tax break but the wealthy got the biggest one by far. This is in keeping with their mantra or should we say little Grover’s mantra that we cut and cut and cut taxes so there is less and less revenue for government because government should be small.

The Bush tax cuts remained in place untouched for over eleven years. Okay.

Secondly, Republicans wanted business deregulated. And so it was to a pretty large extent.

They were in place for some seven years at least.

Spending? Well Bush didn’t exactly cut spending. In fact he increased it to gargantuan levels with two wars and a drug prescription bill. And he chose not to pay for any of it, instead he borrowed the money, creating deficits unlike any yet seen in America. You see the laws were passed, meaning Congress authorized  the wars and the drug bill. But given that the coffers were pretty empty given those low taxes, Bush borrowed money to service the three things.

Okay. Where did that all get us?

Tax cuts didn’t result in any job creation as Republicans claim it will. In fact millions of jobs were lost. .

Deregulation didn’t result in an economic boom. No, instead the unbridled greed and criminality of Wall Street nearly destroyed the economy and send us into a recession that nearly rivaled that of the Great Depression.

And of course spending without paying for anything, sent deficits through the roof.

That is after 8 and in some cases nearly 12 years of Republican policies.

Slowly the economy is recovering, due in part to stimulus, but the deficit continues to grow, albeit at a much much slower rate. In the fourth quarter, the ONLY segment of the economy that shrunk was government spending. Which as the Republicans tell us, should have made the economy sing. Instead it caused it to shrink. Before you tell me that Keynesian economics says we should cut taxes during a recession, they are already so low an ant couldn’t have trouble jumping over them.

You tell me. What is the better plan?

Europe has been dealing with a recession and out of control deficits. We are told that if we don’t stop spending, we are going to fall into their predicament.

What has been the European solution? Severe austerity–in other words, deep spending cuts. Exactly what the Republicans claim will SOLVE the problem. It hasn’t. It won’t. That is why Obama continues to push Europe to SPEND money instead of making further cuts. But so far they are still trying to cut their way out. Don’t look for the Cameron government to make it through another election.

That is the way I see it. Please feel free to tell me I’m wrong, but please in doing so, do show me exactly how I am missing the point, and show me the examples of why you are right. Otherwise, lets get off this silly mantra of “we have a spending problem.” No we don’t. We have exactly the opposite.

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3 thoughts on “Oh How Many Times Must We Repeat IT?

  1. Oh, I really enjoy the way Krugman writes about the economy. He makes it so understandable.
    Congrats on being Freshly Pressed, BTW. (or has that been there all along and I missed it?)

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