Archive for the ‘Keynesian Theory of Economics’ Category

THE OBAMAIAN UNIVERSE

Friday, March 1st, 2013

 

The Wall Street Journal

  • February 28, 2013

Henninger: The Obamaian Universe

A place where everything revolves around the fixed planet of public spending.

  • By DANIEL HENNINGER

It may be that we have to move beyond politics alone to explain events in Washington. We are in the fifth year of the Obama presidency, and Washington is still dead in the water. Four straight years in which the government of the United States of America fails to enact a budget is, well, amazing.  

The sense is growing around Washington, and this increasingly includes Democrats, of living in an alternative universe. Barack Obama gives his State of the Union speech, the sequester looms, and the president flies around the country giving speeches. He’s had virtually no contact on the sequester with the legislative branch. Now he’s going to meet with them after the sequester happens. This is unusual. We need to look outside normal politics for explanations.

Mr. Obama likes to convey the impression that he doesn’t think or do business like other presidents. It’s time to take him at his word. If Washington is starting to look like an alternative universe, that’s because the president is creating an alternative universe, the Obamaian Universe. (Obamaian is pronounced Oh-buh-mayan, as in the recently famous calendar.)

The Obama administration is trying to pull us back into what astronomers would call the pre-Copernican world. Copernicus’ heliocentric system overthrew what was known as geocentrism—the belief that everything in the universe revolved around the earth. Beautiful maps exist depicting geocentrism.

Economic thinkers since at least the time of, well Copernicus, have understood that national well-being derived from private individuals going out into the private world to produce goods and trade goods, an activity that for centuries has created wealth for many nations. No longer. Mr. Obama and his circle divide the economy into separate parts. In the Obamaian universe, the units of the private economy—companies large or small—are satellites orbiting the great fixed planet of public spending. All material and economic life in the Obamaian model radiates outward from a central source of public spending. This is why spending in the Obama presidency abruptly jumped as high as 25% of GDP from a 40-year average of 20% of GDP. (more…)

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THE HISTORY OF OUR GROWING GOVERNMENT

Wednesday, January 2nd, 2013

 

Published on The Weekly Standard (www.weeklystandard.com)

The Real Cliff

The staggering debt from decades of continuous government borrowing is about to come due

Christopher DeMuth

Christopher DeMuth is a distinguished fellow at the Hudson Institute.

December 24, 2012, Vol. 18, No. 15

EXCERPT FROM THIS ARTICLE:  Ronald Reagan and Jack Kemp were authentic supply-siders, but they and other Republicans understood that tax cutting could serve an electoral purpose as well: In response to the big-spending Democrats, the GOP could turn the tables and offer lower taxes rather than purse-lipped fiscal restraint. Then, a few years into Reagan’s first term, another purpose appeared. The administration had been much more successful in cutting taxes than cutting spending; while the economy was recovering smartly, deficits and debt were growing steeply. What were limited-government conservatives to do?

It is important to understand that the fiscal cliff is a charade. There are, to be sure, many conscientious debt reformers working to avert our proclaimed year-end epic fall—along with many cynics who are using the occasion to advance pet projects that will make the debt problem worse. But all concerned are working within a fiscal system that has become seriously pathological. The cliff is the latest expression of that pathology.Just last year, the president and Congress agreed by statute to (a) increase the federal government’s public debt by more than $2 trillion (up to $16.4 trillion) and (b) begin reducing annual federal spending by less than one-tenth that amount starting in 2013. A variety of temporary tax reductions, aimed at spurring recovery from the Great Recession, were also scheduled to expire in 2013. Now that the new debt has been borrowed and spent, the prospect of actually reducing our annual $1 trillion deficits by a significant amount is regarded by all sensible people as a catastrophe that must be avoided at all costs.

And what is to be done to stop the spending cuts and tax increases? This month’s partisan positioning over raising taxes on the wealthy masks a consensus, embraced by the leadership of both parties, on two essential principles of cliff-avoidance. First, the vast majority of Americans who are middle class must be spared any clear-and-present impositions: Their direct income taxes must not be increased, and their Social Security and Medicare benefits must not be reduced any time soon—meaning that any reductions will be as contingent, and possibly ephemeral, as last year’s debt-reduction accord. Second, the federal debt must be immediately increased by yet another $2-3 trillion, with further increases of equal magnitude certain to follow.

These principles embody America’s de facto fiscal policy since the early 1960s: continuous government borrowing to pay for current consumption. That policy was, in the first instance, an unintended consequence of Keynesianism, which proposed that government shore up aggregate demand by spending more than it taxed during economic downturns. (more…)

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MITT ROMNEY CHARTS A NEW COURSE FOR THE MIDDLE EAST

Tuesday, October 2nd, 2012

 

The Wall Street Journal

  • October 1, 2012

Mitt Romney: A New Course for the Middle

East

Restore the three sinews of American influence: our economic strength, our military strength and the strength of our values.

By MITT ROMNEY

Disturbing developments are sweeping across the greater Middle East. In Syria, tens of thousands of innocent people have been slaughtered. In Egypt, the Muslim Brotherhood has come to power, and the country’s peace treaty with Israel hangs in the balance. In Libya, our ambassador was murdered in a terrorist attack. U.S. embassies throughout the region have been stormed in violent protests. And in Iran, the ayatollahs continue to move full tilt toward nuclear-weapons capability, all the while promising to annihilate Israel.

These developments are not, as President Obama says, mere “bumps in the road.” They are major issues that put our security at risk.

Yet amid this upheaval, our country seems to be at the mercy of events rather than shaping them. We’re not moving them in a direction that protects our people or our allies.

And that’s dangerous. If the Middle East descends into chaos, if Iran moves toward nuclear breakout, or if Israel’s security is compromised, America could be pulled into the maelstrom.

We still have time to address these threats, but it will require a new strategy toward the Middle East.

The first step is to understand how we got here. Since World War II, America has been the leader of the Free World. We’re unique in having earned that role not through conquest but through promoting human rights, free markets and the rule of law. We ally ourselves with like-minded countries, expand prosperity through trade and keep the peace by maintaining a military second to none.

But in recent years, President Obama has allowed our leadership to atrophy. Our economy is stuck in a “recovery” that barely deserves the name. Our national debt has risen to record levels. Our military, tested by a decade of war, is facing devastating cuts thanks to the budgetary games played by the White House. Finally, our values have been misapplied—and misunderstood—by a president who thinks that weakness will win favor with our adversaries.

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Associated Press/Hassene DridiAn American school adjacent to the U.S. Embassy in Tunis, Tunisia, on Sept. 15. Protesters burned the school the day before.

By failing to maintain the elements of our influence and by stepping away from our allies, President Obama has heightened the prospect of conflict and instability. He does not understand that an American policy that lacks resolve can provoke aggression and encourage disorder. (more…)

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VIDEO – HOW THE ECONOMY WORKS UNDER OBAMA

Tuesday, September 11th, 2012

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PAUL KRUGMAN SCOLDED BY ESTONIAN PRESIDENT

Thursday, June 7th, 2012
The Lookout

Estonian president scolds Paul Krugman on Twitter

By Liz Goodwin      June 6, 2012

National Affairs Reporter

The president of Estonia’s Twitter rant. (Twitter.com)

The President of Estonia slammed Nobel laureate and New York Times columnist Paul Krugman on Twitter today over Krugman’s short blog post pooh-poohing the Eastern European country’s economic recovery.

Krugman wrote that defenders of Europe’s austerity measures often point to Estonia’s economic recovery to defend their policies. He included a chart that showed the country’s rising GDP and added: “Better than no recovery at all, obviously—but this is what passes for economic triumph?”‘

Estonia’s president Toomas Hendrik Ilves struck back on Twitter. “Let’s write about something we know nothing about & be smug, overbearing & patronizing: after all, they’re just wogs,” Ilves wrote, using the derogatory British slang term for dark-skinned people from Africa or the East.

“Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a ‘wasteland’. Must be a Princeton vs Columbia thing,” he added, referencing the two men’s alma maters. (It’s unclear when and if Krugman actually called Estonia a wasteland, even though Ilves puts the word in quotes.)

So far, Krugman hasn’t joined in the Twitter fight.

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MARK STEYN: U.S., EUROPE ON DIFFERENT PATHS TO SAME PLACE

Sunday, June 3rd, 2012
REAL CLEAR POLITICS
Published: June 1, 2012

By MARK STEYN

Syndicated columnist

The Eurovision Song Contest doesn’t get a lot of attention in the United States, but on the Continent it’s long been seen as the perfect Euro-metaphor. Years before the euro came along, it was the prototype pan-European institution and predicated on the same assumptions. Eurovision took the national cultures that produced Mozart, Vivaldi and Debussy, and in return gave us “Boom-Bang-A-Bang” (winner, 1969), “Ding-Ding-A-Dong” (winner, 1975) and “Diggi-Loo-Diggi-Ley” (winner, 1984). The euro took the mark, the lira and the franc, and merged them to create the “Boom-Bang-A-Bang” of currencies.

How will it all end? One recalls the 1990 Eurovision finals in Zagreb: “Yugoslavia is very much like an orchestra,” cooed the hostess, Helga Vlahović. “The string section and the wood section all sit together.” Shortly thereafter, the wood section began ethnically cleansing the dressing rooms, while the string section rampaged through the brass section pillaging their instruments and severing their genitals. Indeed, the charming Miss Vlahović herself was forced into a sudden career shift and spent the next few years as Croatian TV’s head of “war information” programming.

Fortunately, no one remembers Yugoslavia. So today Europe itself is very much like an orchestra. The Greek fiddlers and the Italian wind players all sit together, playing cards in the dressing room, waiting for the German guy to show up with their checks. Just before last week’s Eurovision finale in Azerbaijan, The Daily Mail in London reported that the Spanish entrant, Pastora Soler, had been told to throw the competition “because the cash-strapped country can’t afford to host the lavish event next year,” as the winning nation is obliged to do. In a land where the youth unemployment rate is over 50 percent, and two-thirds of the country’s airports are under threat of closure and whose neighbors (Britain) are drawing up plans for military intervention to evacuate their nationals in the event of total civic collapse, the pressing need to avoid winning the Eurovision Song Contest is still a poignant symbol of how total is Spain’s implosion. Ask not for whom “Ding-Ding-A-Dong” dings, it dings for thee.

One of the bizarre aspects of media coverage since 2008 is the complacent assumption that what’s happening is “cyclical” – a downturn that will eventually correct itself – rather than profoundly structural. Francine Lagarde, head of the IMF, found herself skewered like souvlaki on a Thessaloniki grill for suggesting the other day that the Greeks are a race of tax evaders. She’s right. Compared to Germans, your average Athenian has a noticeable aversion to declaring income. But that’s easy for her to say: Mme Lagarde’s half-million-dollar remuneration from the IMF is tax-free, just a routine perk of the new transnational governing class. And, in the end, whether your broke European state has reasonably efficient tax collectors, like the French, or incompetent ones, like the Greeks, is relatively peripheral. (more…)

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TWO, THREE, MANY OBAMAS – VICTOR DAVIS HANSON

Friday, June 1st, 2012

NATIONAL REVIEW ONLINE www.nationalreview.com

Two, Three, Many Obamas

As the campaign heats up, one problem is that we continue to meet lots of different Barack Obamas — to such a degree that we don’t know which, if any, is really president.

I think the president believes that private-equity firms harm the economy and that their CEOs are at best indifferent and sometimes unsympathetic to the struggle of average Americans. I say “I think” because Obama has himself collected millions of dollars from such profit-driven firms, and uses their grandees to raise cash for his reelection. Cynical, hypocritical, or unaware? You decide.

I think the president is in favor of publicly funded campaign financing but against super PACs; but again I say “I think” because Obama renounced the former and embraced the latter. Are Guantanamo, renditions, tribunals, and preventive detention constitutional necessities or threats to our security? Some of Obama’s personalities have said they are bad; others apparently believe them to be good.

One Barack Obama crisscrosses the country warning us that a sinister elite has robbed from the common good and must atone for destroying the economy. Another Barry Obama hits the golf links in unapologetically aristocratic fashion and prefers Martha’s Vineyard for his vacation. So I am confused about the evil 1 percent. Obama 1 feels they have shorted the country and must now pay their fair share, while Obama 2 feels they are vital allies in helping the poor by attending his $40,000-a-plate campaign dinners.

Barry Obama respects those who make billions from Berkshire Hathaway, Microsoft, Apple, Google, and Facebook, but Barack Obama does not respect those who make billions from oil, farming, and construction. Is Wall Street the source of our national problems or the source of the president’s political salvation? There is an Obama who runs against a prep-schooled mansion-living member of the elite; there is another Obama who was a prep-schooled mansion-living member of the elite. (more…)

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THE AGE OF ANXIETY – ROMNEY’S CHALLENGE IS TO ADDRESS THE DEEP UNEASINESS IN AMERICA

Sunday, May 27th, 2012

Published on The Weekly Standard (www.weeklystandard.com)

Our Age of Anxiety

Romney’s challenge is to address the deep uneasiness in America and point the way to a comeback.

Yuval Levin   Yuval Levin is a contributing editor to The Weekly Standard, Hertog fellow at the Ethics and Public Policy Center, and editor of National Affairs.

May 28, 2012, Vol. 17, No. 35

EXCERPT FROM THIS ARTICLE:  Barack Obama personifies this opposition to the reforms essential for growth. His express objectives are to protect our existing entitlement system from structural reforms, to increase the tax burden on investment and employment, to further empower and liberate regulators, and to bring more of our economy into the public sector. His economic policy is unimaginative in the extreme—combining early-20th-century social democratic theory with mid-20th-century pork barrel politics. His answer to the government’s fiscal woes is to squeeze the military and the taxpayer to buy a few more years of denial. In every respect, he stands for stagnation and stasis, for defensive consolidation rather than aggressive growth. He thinks the best we can do is to manage decline.

Simply put, President Obama has no interest in a new way of thinking about America’s prospects, and therefore essentially nothing to offer to assuage the public’s growing anxiety. All he can do is try to direct that anxiety away from himself. He is at best irrelevant, at worst a great impediment, to the effort to keep America growing in the new economic order we are entering.

There is something very strange about the 2012 presidential race so far. The election comes at a time of extraordinary public unease, which clearly demands some response from the political system, and especially from the men running for the highest office in the land. But the two presidential candidates are both running campaigns oddly detached from what is rightly worrying voters.

If you were to judge the state of the country by listening only to the Obama campaign, you would conclude that we are on the verge of the long-awaited triumph of the liberal welfare state, and that all that stands in the way is a gang of retrograde Social Darwinists who somehow manage to be simultaneously nihilistic and theocratic. That band of reactionaries ran the economy into the ground for the sake of their wealthy patrons, and now they’re coming for our social programs and for women’s freedoms. Only if they are held off can the forward march of history proceed.

If you were to judge the state of the country by listening only to the Romney campaign, you would conclude that all was well in America until we took a wrong turn four years ago and elected a president hostile to freedom and prosperity. If we just correct that error and undo what he has done, our economy will be ready to bloom again.

But neither of these stories speaks to what actually seems to have voters uneasy. The persistently weak economy is at the core of that uneasiness: Thirty-five months after the recession technically ended, economic growth remains anemic, and unemployment remains very high. But Americans are nervous not only because the economy has yet to bounce back, but also because we have a sense that the economic order we knew in the second half of the 20th century may not be coming back at all—that we have entered a new era for which we have not been well prepared. (more…)

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A U-TURN STRATEGY FOR THE GOP

Monday, February 27th, 2012

February 23, 2012

A U-Turn Strategy for the GOP

By Herbert E. Meyer Herbert E. Meyer served during the Reagan administration as special assistant to the director of Central Intelligence and vice chairman of the CIA’s National Intelligence Council.  He is the author of several books including Hard Thinking, How to Analyze Information, and The Cure for Poverty.

As we head into some crucial GOP primaries — Arizona and Michigan on February 28, then Super Tuesday one week later — grassroots Republicans remain sharply divided over which presidential candidate to support.  A lot of us would vote for None of the Above, if we had that choice.  But we’re united in the belief that if our country continues on its present course for another four years, the damage to our economy and our national security will be catastrophic and irreversible.

And we’re perplexed by the obstinate refusal of so many Americans who aren’t Republicans to acknowledge the acute danger we’re in, and to at least consider voting in November for whichever candidate the GOP finally chooses to run against President Obama.

Is the problem that these people cannot see we’re heading toward a cliff?  Or can they see it just as clearly as we do, but they hate the GOP so much that they would rather go over that cliff with a Democrat at the wheel than be saved by a Republican driver who’s made a last-minute U-turn?

My guess is that they do see we’re heading toward a cliff.  After all, it’s obvious — and these people aren’t stupid.  But they don’t believe we’re in immediate danger.  More precisely, they cannot bring themselves to believe that.  Which means they may acknowledge to themselves — but never aloud, to us, or to some pollster — that at some point they’ll need to vote for a U-turn.  But not now, or any time soon, because they believe the cliff is still a long way down the road.

If this perception is accurate, it suggests a wholly new approach to the 2012 election — not just for whoever emerges as the GOP’s challenger to President Obama, but for Republican candidates at all levels of government.  We should talk to voters the way a physician would talk to a patient who’s got some serious health problems: calmly and professionally, but bluntly: (more…)

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ECONOMICS FOR THE LONG RUN – THE REAGAN YEARS

Saturday, January 28th, 2012
The Wall Street Journal

  • JANUARY 25, 2012

Individuals should be free to decide what to produce and consume, and their decisions should be made within a predictable policy framework based on the rule of law.

By JOHN B. TAYLOR

As this election year begins, a lot of people are wondering what we can do to restore America’s prosperity and create more jobs. Republican presidential candidates are offering their ideas, and at his State of the Union message on Tuesday President Obama presented his. I believe the fundamental answer is simple: Government policies must adhere more closely to the principles of economic freedom upon which the country was founded.

At their most basic level, these principles are that families, individuals and entrepreneurs must be free to decide what to produce, what to consume, what to buy and sell, and how to help others. Their decisions are to be made within a predictable government policy framework based on the rule of law, with strong incentives derived from the market system, and with a clearly limited role for government.

taylor

Getty ImagesRonald Reagan: He and advisers such as George Shultz shunned the idea of stimulus and agreed on ?the need for a long-term point of view.? (more…)

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