Obama Isn’t A Keynesian

He just thinks he is:

If Keynes were alive today, what would he think of President Obama’s fiscal policies?

He would roll over in his grave if he could see the things being done in his name. Keynes was opposed to large structural deficits. He thought that they chilled rather than stimulated the economy. It’s true that we’re stuck with large deficits now. The goal should be to reduce them, not to take on new spending that makes them worse.

Today, deficits are getting bigger and bigger with no plan to significantly lower them. Keynes understood what the current administration doesn’t understand that the proper policy in a democracy recognizes that today’s increase in debt must be paid in the future.

We paid down wartime deficits. Now we have continuous deficits. We used to have a rule people believed in, balanced budgets. And now that’s gone.

But misinterpreting Keynes allows them to pursue their political agenda of growth in government.

7 thoughts on “Obama Isn’t A Keynesian”

  1. Obama has essentially stated he’s not a Keynesian by highlighting that the goal of spending is the spending, not the plausibility of a future rate-of-return. There was some questioning on the usefulness of hiring 140,000 extra people to geotag every door in America. Like: “How is that infrastructure?” And a paraphrase of his response: “It isn’t. The goal is to pay people, and they get paid!”

    There’s a heck of a big difference between pure “make work” spending and “major infrastructure that happens to require a lot of jobs to construct it.”

  2. IMO a big government spending push was indeed necessary to pull out of this recession and prevent the next one, which is likely coming soon. If it does happen it will make this recession seem like a breeze in comparison.

    However the vast amount of spending was ill used into things that will not help the economy build up defenses against shocks in the future. It was also just too damn large a stimulus.

  3. Godzilla: “…was indeed necessary to pull out of this recession…”

    But we haven’t pulled out of it. That’s the whole point. GDP is up, but only because government spending counts on the plus side (!!) of GDP. There’s no tax revenues backing it up though, as all levels of government are reporting record losses in revenues (yet do nothing about tightening their own belts). Right now it’s all funnymoney borrowed from China, et al. As to the employment side of things, we’re still losing jobs. We haven’t added one net job to the economy since the fall of 2008, and the only reason the unemployment rate is dropping is because of the models. That is, the unemployment models have been assuming there’s about 800k more jobs being created and filled, when that’s clearly not the case. Furthermore, we keep losing people from the tracking figures due to their becoming “discouraged,” whatever the hell that’s supposed to mean. I won’t even get into the details about how most of the trading on Wall Street is, once again, in financial stocks, nor will I get into the parts about Fannie and Freddy doing their level best to re-inflate housing values.

    If you want to know how the economy is doing, don’t look at unemployment. Look at absolute-numbers employment, and how that’s been in freefall for roughly 18 months and counting. Look at inventory-replacement vs actual new orders in the manufacturing side. The foundation of the economy has been made of quicksand instead of Quikrete, and we’ve still got a long way to go on this collapse.

  4. Godzilla’s comment illustrates the problem. A “big spending push” was needed to pull out of the recession, but the spending was too big and on the wrong stuff.

    In 2008, “change” was needed, but people voted for Obama.

    The parallels are obvious.

  5. Speaking of the economy, I’m planning a retirement account at work. I’m thinking of going 50% S&P 500 index fund, 25% Oil, and 25% Gold, probably the Gold Spider.

    I’m expecting that 1) Obama’s socialist policies will drive the Dollar into the ground, and 2) there will be war in the Persian Gulf.

  6. I can’t help but notice that all three of these items are three of the four hypothetical “bubbles” that a Forbes magazine article warned against last month. I don’t have much of an opinion since I haven’t been keeping track of most financial matters for a couple of years. But your proposed portfolio sounds obscenely specialized. And your intent to invest in indices like S&P 500 and Gold Spider are warning signs to me.

    As far as I know, these could work out well, but you do not appear to have experience with any of these markets (else why invest in indices?). That combined with the extreme focus in two commodities means you have significant risks from events that wouldn’t touch a more general portfolio. For example, suppose the US dumps gold on the market? Or oil demand drops greatly over the next decade? That could really harm your portfolio even if you are in general correct. The S&P 500 is extremely general and has historically performed well over many decades, so it’s not a bad choice.

  7. There should be a more general commodity index of some sort. Something where you aren’t putting money into the “standard” place – gold (or silver or platinum) – yet can have your assets in invested in “real objects.”

    A large collection of piles of coal, aluminum, copper, diesel, etc. Note that aluminum and coal sort of offset one another. Plausible things that would kill the price of coal (ban on coal-fired plants) should directly boost the price of aluminum (extremely energy intensive).

    So: “Things that don’t depreciate.”

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