Keynesian Economics is Not the Answer

John Maynard Keynes was a British economist who is most famous proposing what is commonly called today deficit spending. That’s only a portion of his theory but it captures the gist of it. He particularly thought government deficit spending was necessary in times of economic turmoil in order to stabilize the economy. His ideas were first put into practice in a significant way during the Great Depression – although some people argue that FDR didn’t do enough to stimulate the economy (i.e., he should have pushed for more spending). There is some merit to this idea. The Great Depression really did not end until WWII and all the government money being spent on building war machines, training and supporting soldiers, etc. On the surface it looks like massive government spending was what fixed the economy. That may be.

However, it also started an era (that has not ended since – there were short periods of time when Keynesian economics was not popular with governments but many of the underlying principles were never rejected) of big government and governmental intrusion into the “normal” workings of capitalism and the free market. As the markets thrived, people spent more money, acquiring more possessions. Governments and businesses followed suit. The U.S. enjoyed relative prosperity between the years of 1945 and 2000 (I could even argue it to 2007). There were some rough stretches in the late 70s and in the 80s but generally the economy was quite good. The Korean and Vietnam conflicts did not significantly interrupt the economy. Neither has any war since (although the latest Iraq War certainly did not help the budget).

The problem with Keynesian economics is that no one reverses the intervention. Governments spend more to stimulate the economy then never (or very rarely) cut back. The other problem is that individuals also deficit spend in the acquisition of more goods. Wants become needs and the deleterious cycle of borrowing and spending then borrowing to repay spending takes on a life of its own. In short, both governments and citizens overspend, which is an unsustainable path. I believe much of our current economic crisis stems from such wasteful deficit spending on an individual and governmental level. I think that Keynesian economic policies were one of the instigators of the current economic turmoil. It just took many years for it to develop again.

That’s why I don’t believe that having the government jump in to stimulate the economy is the right path, especially now that the most conservative estimate of the cost of the economic stimulus is $1.2 trillion (other estimates put the cost at around $2 trillion)! Sure, it will help the economy in the short term. It will probably even help the economy for much of our lifetimes. However, I think it “fixes” the economy at the expense of our children’s security. At some point the government cannot jump in and fix the economy any more because it is the economy. Just as communism was shown to be economically unsustainable, Keynesian economics is also unsustainable (unless it is applied topically then removed when the crisis is over, to use a bit of medical terminology; even then I don’t think it is the best approach). Keynesian economics is not socialism but it does have socialist inspiration. I’m not using an association fallacy (i.e., guilt by association) to equate Keynesian economics with communism or socialism (i.e., Keynesian economics = communism = bad; this is not true) – that’s not my point. I’m merely pointing out that at least the communist variation of socialism was shown to be unsustainable. Governments that strictly follow Keynesian economics could end up in an unsustainable state (as I said before, there would be no more room in which to maneuver).

Now, I don’t think a completely hands-off approach is necessarily the best way to help the economy but we should start with less intervention, less government, and less deficit spending. If we as people and if the government all lived within our means, that would be a major step towards fixing the economic problems of our nation and of our world.

Thomas Jefferson on Religious Liberties

Thomas Jefferson, one of the Founding Fathers of the United States of America, played a major role in the establishment of the U.S, especially in helping shape the founding philosophies. His writings and ideals inspired others of his generation; they still inspire us today. Thomas Jefferson like all of the Founding Fathers believed in God. The U.S. was founded on Judeo-Christian beliefs and principles – the government was secular but the people were not. Jefferson, like the other Founding Fathers, knew however that state-sponsored religion too often led to oppression and loss of individual freedoms. He also knew that the converse was true – not allowing the free exercise of religion would also be harmful.

In 1779, Thomas Jefferson wrote a document called the Virginia Statute for Religious Freedom. This document was, in Jefferson’s eyes, one of his greatest accomplishments. It was codified into law in Virginia a few years later. This document is important today because many who subscribe to secularism and atheism are trying to remove all religion from public discourse. Many view religion as nothing more than an aberration of a deranged mind. The Founding Fathers felt strongly the opposite – Jefferson included. I’ll include a few highlights from this important document.

“Whereas Almighty God hath created the mind free; that all attempts to influence it by temporal punishments or burthens, or by civil incapacitations, tend only to beget habits of hypocrisy and meanness, and are a departure from the plan of the Holy author of our religion, who being Lord both of body and mind, yet chose not to propagate it by coercions on either…”

“…the impious presumption of legislators and rulers, civil as well as ecclesiastical, who being themselves but fallible and uninspired men, have assumed dominion over the faith of others, setting up their own opinions and modes of thinking as the only true and infallible [this is true of both religious and non-religious beliefs], and as such endeavouring to impose them on others, hath established and maintained false religions [these “religions” could be secular] over the greatest part of the world…”

“…our civil rights have no dependence on our religious opinions, any more than our opinions in physics or geometry; that therefore the proscribing any citizen as unworthy the public confidence by laying upon him an incapacity of being called to offices of trust and emolument, unless he profess or renounce this or that religious opinion, is depriving him injuriously of those privileges and advantages to which in common with his fellow-citizens he has a natural right…”

“That no man shall be compelled to frequent or support any religious worship, place, or ministry whatsoever, nor shall be enforced, restrained, molested, or burdened in his body or goods, nor shall otherwise suffer on account of his religious opinions or belief; but that all men shall be free to profess, and by argument to maintain, their opinion in matters of religion, and that the same shall in no wise diminish enlarge, or affect their civil capacities.”

“The rights hereby asserted [religious liberties] are of the natural rights of mankind, and that if any act shall be hereafter passed to repeal the present, or to narrow its operation, such act shall be an infringement of natural right.” (Source, all emphasis mine).

Thomas Jefferson stated that mankind was created by God with a free will. He argued for separation of church and state because state-sponsored religions usually suppress the free exercise of other religions. What many secularists ignore is that Jefferson, in supporting a separation of church from state, was not arguing against religion at all; to the contrary, he believed that religions are vital (even if he wasn’t particularly fond of the specific religions of the day). He argued for religious liberties. The free exercise of religion should play a large role in politicians’ lives if they are religious. If they are not, then they should not be forced to accept any religion. He also stated that religious beliefs should not be given greater weight in political matters than mathematics or science (this means that religious beliefs should also not be given less weight either). In the end, Jefferson stated that religious liberties are “natural rights of mankind” – they are part of our fundamental rights.

Fare Thee Well – Updated

Tomorrow is the end of an era. Pres. George W. Bush – like him or despise him – has left a mark in U.S. history. Some of the most memorable events that occurred during his presidency, such as the terrorist attacks on the World Trade Center, were not things that he did but were things that simply happened. Other things, such as invading Afghanistan and Iraq were things that he authorized and pushed for. Most people thought he would be another Bill Clinton-type president, focused mainly on social and domestic issues and quickly forgettable. Bill Clinton was a fair president – he turned out to be quite centrist – but he was immoral and dishonest. Pres. Bush is also quite centrist, even if many people do not want to believe that, but he is far more honest and moral than Bill Clinton.

I’m not calling Pres. George W. Bush a saint, but he stood for something and always tried to do what was right. He is the type of person who cares very little for polls, in a day when most other politicians live for polls as if there is nothing more important than bending to every whim of their constituents.

Pres. Bush’s presidency was attacked by the media and by liberals from the beginning. When the Florida Supreme Court stopped the mayhem of the 2000 election vote recounts, where Al Gore and many Democrats tried to steal the election from Pres. Bush, many people instead accused Pres. Bush of stealing the election. I’m all for fair elections but the endless political maneuvering for more votes had to stop. Al Gore received more popular votes than George W. Bush but he did not win the electoral votes. Many people were so bitter over a small thing called the Constitution that they never gave Pres. Bush a chance. Sure, most forgave him in the days following Sep. 11, 2001 but their praise quickly turned to scorn. The rose blooms wilted leaving only thorns.

Meanwhile, the country was in economic turmoil. This turmoil started in 2000 and didn’t stop until 2002; even then, most of the problems were just postponed until 2007. These economic problems were not caused by any one entity. The root cause of them started many years ago as we became more and more greedy as a people. There is little the President could have done to stop the coming economic storms. Maybe the government should have kept out of the economy even less than they did (especially back in 1999 when the government basically forced lenders to approve mortgages to risky clients).

While I disagree with Pres. Bush on some issues (starting the war in Iraq and all the deficit spending, for example), I agree with his stances on abortion (no abortions except in cases of rape, incest, when the life of the mother is in serious danger, and when the fetus has no chance of viability outside the womb – even in those cases, abortion is not something that should be taken lightly or done without serious consideration of all other options. Abortion is only to be used as last resort). Pres. Bush signed an executive order that disallowed taxpayer’s money to be spent on international programs promoting abortion. He also did other positive things such as promoting abstinence education. He supports traditional marriage and constitutional amendments supporting traditional marriage. During his presidency, public libraries also had to install filters to protect children (and adults) from pornography. If that’s censorship, then sign me up for more of that type of censorship. Pres. Bush did increase science research funding as well, even if where funds were allocated changed.

Pres. Bush also signed in a sweeping educational reform bill. I’m not a fan of No Child Left Behind (it was poorly designed and poorly implemented) but it was an example of bipartisan reform (take whatever meaning you want from that). Pres. Bush also dramatically increased funding to fight HIV and AIDS around the world, saving many people’s lives. He pushed for more space exploration – including manned space exploration – as well.

During his presidency the farce of the “assault weapons” ban was repealed. It was a law that did nothing to reduce crime. Handguns are involved in more crimes than assault weapons and not just because there are more of them. I’m not in favor of banning handguns but the ban of assault weapons was nothing more than pure politics based on pathos instead of fact and reality.

Pres. Bush also appointed good strict constitutionalists to the Supreme Court. The Constitution is not a “Living Document.” It should not be reinterpreted based upon the whims and winds of social change. Pres. Bush’s appointees will likely serve very well as Justices.

Pres. Bush also is a conservationist. The problem is that he does not attend the Church of Environmentalism so extreme leftists painted him as someone who does not care for the environment. On the contrary, he has set aside large portions of the world for conservation. His ranch in Texas is also more “green” than most of the homes of other politicians who push “green” policies – including the Church of Environmentalism’s spokesman Al Gore. Pres. Bush also signed in fuel economy standards increases for cars; he additionally pushed for more research into alternative fuels.

While I don’t agree with Pres. Bush’s deficit spending, he did push for tax cuts. He also fought for removing the marriage tax penalty as well as increasing tax credits for children. Reducing taxes is almost always the best policy to help the economy.

Now we come back to the wars. Few disagree with Pres. Bush’s decision to topple the Taliban regime. Many people dislike the war in Iraq though. Contrary to popular opinion, Pres. Bush never lied to us to start the war in Iraq. He acted on what was the best intelligence we had on Hussein. That intelligence turned out to be wrong (or Hussein was able to destroy or hide any remaining WMDs) but Pres. Bush did not lie. In any case, if Pres. Elect Obama does not prematurely pull U.S. troops out, there will be a fairly stable democracy in Iraq, something radical Islamic terrorists dislike more than just about anything else. Terrorists have little power in democracies. Pres. Bush stood up to terrorism and never gave in. He spoke back in a language they understand – violence – and they trembled and were afraid. Bin Laden is little more than a figurehead now. He hasn’t been captured but he has very little direct power any more. Pres. Bush demonstrated a fairly mature understanding of geopolitics.

One additional thing that tells you something about Pres. Bush is the fact that he is happily married to Laura Bush. She is a genuinely nice and good person and must have seen and must still see something good in Pres. Bush. Who people marry can tell you a lot about them.

Pres. Bush has been painted by his political opponents and the media as both imbecile and fiendishly brilliant (he is quite intelligent by the way). They don’t, of course, call him brilliant outright but they imply it as they talk about conspiracies (e.g., that the war in Iraq was started to increase his oil profits; or, he drove up oil prices in order to make more money). Pres. Bush has been given both deity-like powers (e.g., he caused Katrina) and been called nothing but a puppet. Many view him as morally bankrupt and a liar, which simply demonstrates their lack of understanding about morals and honesty.

I for one, will miss Pres. Bush. It hasn’t been an easy 8 years but he stood up to the challenge and performed admirably. I believe history will vindicate many of his actions.

“Let Detroit Go Bankrupt” – NYTimes.com

Op-Ed Contributor – Let Detroit Go Bankrupt – NYTimes.com.

This article by Mitt Romney was published back in mid November. He provides his perspective on the “Big 3” bailout. As a very successful businessman, his opinion is worth something.

I’ll post a few good quotes from the article.

“Detroit needs a turnaround, not a check.”

“Retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers. That extra burden is estimated to be more than $2,000 per car.”

“Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th.”

“Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation.”

“Starving research and development is like eating the seed corn.”

“I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today.”

The King is Dead! Long Live the King!

Obama, in a keen maneuver showing how he is bringing change to Washington, proposed a radical new plan to help the economy. I’ll quote from a CNN headline: “Obama begins push for tax cuts, more spending.”

It seems he learned something from Pres. Bush and Congress after all. I like this bold new fiscal plan. Let’s bring in less money while spending more money because that will magically fix the nation’s financial problems. I understand that on a theoretical macro economic scale, it’s not a terrible plan because the goal is to stimulate the economy by freeing up liquid assets. This in turn grows the economy, bringing in more tax revenues. At this point government spending will be reduced and Poof! the economy is good again.

However, the government never seems to get to the reduced spending part. Cutting taxes and increasing spending is a very difficult way to stimulate the economy – it requires much financial acumen as well as the willingness and ability to stop the plan as soon as possible. It’s a good plan in the short-term but is not sustainable. On top of that, it’s amoral at best.

The best way to increase financial stability and to make the economy stronger in the long-term is for the government to reduce taxes and reduce spending. They don’t even have to reduce taxes at first, but they have to learn to live within their means.

The only change so far in Washington is that change the government is “borrowing” from taxpayers and the extra change the government mints to help “fund” its spending habits. I know my critique is simplistic but Obama’s “stimulus plan” basically boils down to “tax less, spend more.”