Last week, NPR concluded its series on influential economic philosophers with the left’s favorite son, John Maynard Keynes. Unsurprisingly, it was a fawning piece filled with left-wing Democrats voicing praise and allegiance. More interestingly, the piece flatly admitted that Pres. Obama’s policies are Keynesian – most left-wing pundits have declined to tie Obama’s philosophies with the largely discredited Keynes. Politicians and their backers shy away from tying themselves to polarizing figures like Keynes, Hayek, or Friedman because those figures’ stances are inflexible; politicians like to twist with the winds of populism. Obama uses code words for Keynesianism and socialism, but won’t put the actual words on his teleprompter. So, NPR says Obama is a Keynesian, but is he really?
Keynes’s main theory was that, during recessions, government spending and fiscal looseness could engage unused resources so that they would themselves consume other resources (i.e. government intervention to ‘prime the pump’ of an economy). Likewise, when resources are nearly fully employed, the government should cut its spending and tighten fiscal policies to slow an overheated boom. Keynes saw the government as a rudder to a nation’s economic ship, never letting the economy fall too low or overheat into a bubble.
Of course politicians of all stripes ignore the Keynesian dictate to cut spending during booms. Instead, as Pres. George W. Bush put it in 2000, “We will use these good times for great goals.” Bush then went on the greatest spending orgy in US history. Politicians use Keynes as a foil to enjoy their wont – increasing spending during all economic seasons.
The bottom fell out of government stimulus in the real estate and financial sector just in time for Obama’s inauguration. True to his ill-disguised Keynesianism, Obama called for a massive stimulus. Stimulus would put the economy to right by putting America back to work. Of course the stimulus was a failure. The Weekly Standard
reported that for each new job created, the stimulus spent $278K. Economic growth, already weakly positive by the implementation of the stimulus, remained weakly positive. Unemployment went up, not down.
What happened? For starters, Keynesianism is a failed philosophy. Stimulus simply directs productive assets toward unprofitable ends. The classic example of make-work stimulus is employing dozens of workers to mow a lawn with scissors. While one man could mow the lawn with a tractor, and three men could mow the lawn with push mowers, 100 men could mow the lawn with scissors. Make work suggests that these are improvements in employment, but rational economics seeks to maximize output, not employment. Employment is a byproduct of economic output, not the other way around. When protestors shout ‘people before profits,’ they use code words for make work programs.
Just as important, Obama never really sought to stimulate the economy. The stimulus money, like most government spending, went to political paybacks. Obama earmarked union bailouts and green energy initiatives. Indeed, in order to receive much of the stimulus, States were required to commit to future elevated union spending even without Federal support. Unions, by their nature, reduce employment. They seek to force competition aside to elevate their own compensation, thus lowering both total output and employment. Funding union jobs is defunding the broader employment base. Likewise, green jobs are anti-employment. Green energy seeks to replace perfectly useful regular energy, only with higher prices. Such drains on disposable income only reduce commerce and employment. Not only does stimulus not work in general, Obama’s stimulus was actively anti-employment.
Keynes was a misguided elitist who saw those of his order as generals marshaling the output of poor ignorants who could not fend for themselves. Central planning, intervention, and control are the tools of a Keynesian, but they are also the tools of cynical politicians for whom these tools are also their life goals. Perhaps Obama the Keynesian is too kind a moniker. NPR may as well have called him Obama, the cynical crony politician.
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