Peter Beinart claims the biggest loser in Tuesday’s election was Keynesianism. Instead of being thankful, he is distraught:
The real loser is Keynesianism: The idea that when businesses and individuals stop spending, government must. That idea will not rebound; it’s over for this period in economic history. First Britain, and now the United States, are responding to the worst economic contraction in 75 years by contracting government, despite the fact that the world’s best economists are screaming that it’s exactly the wrong thing to do. As Virginia Thomas might say, “Have a good day!”
In retrospect, maybe the greatest blame lies with America’s pre-recession policies.
Yes, 110% correct. He gets it.
Um, not by a mile.
In retrospect, maybe the greatest blame lies with America’s pre-recession policies. For years, green-eyeshade types had been warning that America needed an economic surplus to prepare for the huge entitlement costs imposed by the baby boom retirement. Instead, George W. Bush—with a boost from Alan Greenspan—spent the surplus on war, tax cuts and expanding entitlements, leaving Americans anxious about debt even before the economic meltdown. Had America’s government done something about its long-term fiscal problems while times were good, perhaps America’s people would be more tolerant of the short-term spike in debt required by Keynesian stimulus. Instead, debt—even necessary debt–has become a metaphor for governmental irresponsibility and national decline. Fiscal restraint is to the anti-Obama Republicans what sexual restraint was to the anti-Clinton Republicans: the ultimate character test.
One, to create this so called “surplus” is technically impossible. The government cannot save money, just sock it away for the future. It must by default spend all it takes in. (Yes, by necessity, to maintain the state, it must spend far more, but that’s another issue.) If for instance, it was to actually “save”, let’s just say it took $100 billion out of the economy through taxation and just sealed it away in some vault. (Of course, why should it when it can just print to its heart’s content. And, true savings would have to be in the form of some solid, real, tangible currency. A good possibility would be gold, but then again, that’s never been tried before. Gold as money? Are you kidding me?)
So, now the government (assuming no actual increase in the money supply) simply continues to extract such wealth from the economy. In very short order, one would see massive contraction and the very same individuals (like Mr. Beinart) calling for releasing the reserves.
Two, the entire entitlement system is an unsustainable ponzi scheme. There is simply no means to fix it, salvage it, or fund it. Anyone who would argue such is a fool, or a liar. Or, writer for the NY Times.
Debt is always destruction, as is inflation. What caused this mess was the massive expansion of the money supply, the classic boom/bust cycle. What Mr. Beinart has no understanding of is the causes, and real solutions, to the problem. What is needed is far less taxing and spending, as little interference in the economy so it can liquidate the malinvestment and return to a savings backed, real investment driven growth model. The latest attempts by the fed to inflate the economy are only going to delay real recovery and exacerbate the problems.
But Mr. Beinart ought to at least admit the utter failure of the bailouts, takeovers, spending, printing, debt, regulations, as well as the stunting power of regime uncertainty. At least the American people do.
Mr. Beinart is supposed to reflect the reasonable center-left, and as such, is taken to be a serious commentator and influential voice outside the usual partisan hackery. Here, he shows no such acumen.