Sunday, November 9, 2008

Economic Illiteracy Has Benefitted Keynesian Liberalism










A lack of understanding basic economics has sullied Supply Side policies and benefitted the failed Keynesian policies of Jimmy Carter, still en vogue with man Liberal Democrats today. For that reason, we are in danger of killing the golden goose (low tax, Supply Side policies) that have delivered fifteen straight years of single-digit Misery Indexes!

Today just supporting Free Trade (like Rahm Emanuel and the incoming Obama administration do), welfare reform (like Emanuel and the incoming Obama administration do) can earn you the scorn and derision of misinformed, so-called Liberals, like those at the Daily Kos and MoveOn. In fact, you can’t be a “true Liberal,” in those folk’s eyes, if you don't hate!

Now, I’ve never believed in the idea of "building an economy from the ground up," at least not in terms of seeking to artificially increase the spending power of those in the lower 50% of income earners, by increasing costs/taxes, etc. on those in the top 10% to 20% of income earners.

Lowering the Capital Gains rate, slashing the corporate tax rate and making it easier for small businesses to start up, without the anchor of government hung around their necks, would, in my view, be the best way to "build the economy from the ground up" - by rewarding those with the entrepreneurial drive, the ambition and the ability to start and successfully run small businesses.

One of the ironies is that the current massive economic problem (the current credit crisis) was caused by over-regulation - primarily the turbo-charged CRA. The irony that a severe economic crisis born of over-regulation and TOXIC regulation (the turbo-charged CRA) has been used to move us further down a path of MORE regulation and MORE failed Keynesian policies is as tragic as it is dangerous.

Like I said, I'll let the Misery Index tell the story going forward.

We've been on a Keynesian course since at least 2007 and the fact that the current Bush admin has willingly cooperated with Keynesian Dems like Pelosi and Reid doesn't change the fact that "Keynesianism is a Liberal disease."

The Misery Index for 2007 was 7.45 (there was little impact from the few Keynesian policies passed late that year and the enhanced revenues from the earlier tax cuts covered Bush's other expenses), but it's probably going to top 10% for 2008 (it’s at 9.98 through September of 2008 and it doesn’t seem to be getting better), and there's little reason to believe that Keynesian policies, going forward, won't lead to what they did the last time we employed them - a 16.5 average annual Misery Index over four years.

The people most betrayed by all this have been the Libertarians. Many Libertarians initially embraced the Supply Side/Greenspan-led GOP, with some severe reservations over the socially repressive Christian Right, in the wake of the Carter years delivering the REAL "worst economy since the Great Depression."

Sadly, the Moderate-wing of the GOP has consistently abandoned Supply Side policies. In fact, since Carter, the ONLY administrations to buck the Keynesian trend were both Bush-41 and Bush-43.

Bush Sr. (41) came into office attempting to throw his better, Ronald Reagan under the proverbial bus.

That was right before Bush-41 shit the bed and delivered "the SECOND WORST economy since the Great Depression" - four straight years of double digit Misery Indexes, though much lower than Carter's, at a comparatively measly 10.5 average annual Misery Index over four years.
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Bush-41 delivered that economy, in part by cooperating with Keynesian dinosaurs like Ted Kennedy to undermine his own "Read my lips," pledge.

Clinton came in as a Centrist Supply Sider, re-appointing Alan Greenspan, upping the H-1B Visa limits TWICE, embracing Free Trade and cooperating (after some early conflict - the government shutdown of '95) with the Gingrich Congress on deep federal budget cuts, welfare reform, a Cap Gains rate cut, etc.

Bush-43 governed with a Supply Side tax policy during his first term (although, even with a GOP Congress, the AMT was never scuttled), with his across the board income tax rate cuts and another Cap gains rate cut, which INCREASED tax revenues in every year since!

Early on, the business scandals (Enron, Tyco, Worldcom, Adelphia, Arthur Anderson, etc) forced some Keynesian ham-handed) regulation (Sarbannes-Oxley) and after that the Bush-41 administration spiraled off that early Supply Side track, by piling gobs of social spending (the NCLB and prescription drug boondoggles) on top of the necessary war-time spending (Afghanistan, Iraq and the tens of billions spent on Homeland Security).

Recently, some economists have dangerously argued that some degree of Keynesian over-spending can be maintained, so long as tax revenues are maximized by things like keeping tax rates low, along with keeping commerce at a maximum.

Ironically neither Bush-41, nor Bush-43 much appreciated that, or at least, in G W's case, he seemed to overestimate the power of the increased revenues from those tax cuts. It is highly unlikely that a return to 1970s era policies can deliver anything other than 1970s era results.

For those holding to the Keynesian viewpoint, the Misery Index for 2008, which could be the first to top 10.0 since 1992, SHOULD be cause for some foreboding.

4 comments:

Violence Worker said...

B-b-b-b-b-b-but these are better and smarter people! They have it figured out now! They are educated and feel your pain! The know what you need.

VW

JMK said...

THAT is indeed what they seem to think VW.

That seems to be evidence of an arrogance born of a lack of both the intellect and experience, which is most common among those souls who haven't the powers of obervation enough to be humbled by the magestic actions of free individuals.

It looks as though it'll have to get much darker before we see the dawn again.

Kofi Bofah said...

Ummm.

What about Reagan?

Dude, I have no idea where you get your facts from. Reagan was the master of supply-side, trickle down.

You claim that the Bushes were the only Presidents to implement said strategy.

Not really.

JMK said...

What about Reagan?

"Dude, I have no idea where you get your facts from. Reagan was the master of supply-side, trickle down.

"You claim that the Bushes were the only Presidents to implement said strategy." (Kofi Bofa)
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Dude!

As I noted, "...Ronald Reagan ushered in the Supply Side era..." and "Reagan’s successor, George Bush-41, moved away from strict Supply Side tenets and cooperated with Ted Kennedy in breaking his “Read my lips, no new taxes,” pledge. As a result, Bush-41 was only the second post-WW II American President to preside over four straight years of double digit Misery Indexes."

Reagan's administration saw the Misery Index DECLINE over each of his first six years, reaching single digits in 1986, where it stayed throughout the rest of his tenure.

Then when Bush Sr (Bush-41) flirted with KEYNESIANISM (cooperating with the always misguided Ted Kennedy on raising taxes) he became only the 2nd post-WW II American President to preside over 4 straight years of double digit Misery Indexes.

Bush Sr. was a GOP Moderate who derided Supply Side policies as "Voodoo economics."

Bill Clinton was a pro-Free Trade, pro-Business Supply Side Democrat who re-appointed Alan Greenspan and cooperated better with the Gingrich Congress than he did with the more Liberal/Keynesian Foley Congress.

Yes, Gingrich had to briefly shut down the federal government in order to force the first and UNFORTUNATELY the last real federal budget cuts - those cuts are why (1) delivered the LOWEST Misery Indexes in over four decades and (2) delivered all those budget surpluses of the late 1990s.

G W Bush has been a very mixed bag.

His across the board income tax rate cuts INCREASED income tax revenues in each year thereafter and his Capital Gains rate cut also INCREASED tax revenues.

Unfortunately, he used those tax rates to mask the ill-effects of some massive federal expenditures - the prescription drug boondoggle, the excessive spending involved with (what should've been a low to no-cost) NCLB Act, the ill-conceived "stimulus package of this past spring and this inane bailout package.

Conservative (Supply Side) Republicans AND Democrats opposed the current bailout and one of the things they wanted andfailed to get when McCain made his bailout photo-op was "mandating all bailout money go to lending."

Keynesian Democrats and Republicans opposed that.

There are only 2 economic models, the market based (often called the "free market") and the command or government-run economy.

What the U.S., Canada, Western Europe and Japan have is a REGULATED Market-based economy

The completely unregulated free market works! It produces maximum productivity and prosperity, but it also delivers the most economic instability - new start-ups and new ideas constantly supplant older established businesses and industries and in the process displacing workers, who need to re-train (on their own) for new technologies).

The command economy has never been instituted without mass murder because it is predicated on the government owning all property and private property owners don't tend to part with their property while breathing.

Supply Side policies are more effective precisely because they utilize the optimum potential of the free market, while preserving some degree of government regulation and oversight.

American and European (the Austrian School) Supply Siders tend to belive that even America's economy is currently OVER-regulated and want lower tax rates and less regulatory red-tape. Keynesianism tends to lead to disaster because it is closer to the command model.

The facts show that Supply Side policies work best. As today, the most Supply Side, least regulated market in the world, Hong Kong's, also has the world's LOWEST Misery Index (6.0), while the most Keynesian (highly regulated and government-controlled) economy in the world, Venezuela, has one of the HIGHEST (27.2) Misery Indexes in the world!

I think those facts speak for themselves.

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