Tag Archives: recession

Obama, Hayek vs. Keynes, and Of Course, Rap

When the first two stimulus packages were passed, many citizens were nodding their heads, saying to themselves it made sense. At the same time, most of political establishment did the same nodding, egging on the spending. It makes sense, right? Private spending is down, so the Federal Government spends big to cover at least some of the gap, therefore stimulating more spending? Not so fast, though. It’s actually not that obvious, and is hardly settled economic theory. It’s an old argument, too, going back to the first half of the 20th century, notably as a disagreement between the theories of John Maynard Keynes and Friedrich Von Hayek.

So, in the dawn of the second decade of the 21st century, how does one get caught up on these theories? YouTube, of course. A RAP video on YouTube.

Back? Good. Now, two years after the first stimulus under GW Bush, and a year after a much larger version under Obama, how’s the economy going? But don’t worry: they’re getting ready to pass a third one, if they can find the votes (watch for it under the term “jobs bill”). Does this invalidate Keynes’ theories? Maybe, but there’s a good argument to be made that Obama isn’t really following his proscriptions anyway. Money magazine has a great interview laying out this idea.

My opinion is this: as soon as Keynes came out with this spend big theory, politicians everywhere danced, laughed, and danced a bit more. This gave them a scientific excuse to borrow money that we don’t have to spend on pet projects, on what contributors would like pumped up, and on buying votes from eager constituents. It was a license to spend, and spend big, all under the cover of what the experts say should be done. This goes for both parties, so it’s not a partisan thing. So yeah, I’m a big fan of Hayek.

I’ll end with this: it can’t go on forever. It might go on for a long, long time yet, but you can’t keep increasing the national debt at rates like this and not have to pay a terrible price someday.

These Are the Smart Guys?

Innocent Bystanders has been tracking the actual unemployment rate these past few months against what Team Obama said would be the unemployment numbers if the Trillion Dollar Stimulus package passed, and what it would be if it didn’t pass. Holding the country hostage via fear, uncertainty, and doubt? You betcha. It’s one thing if it would have worked, but guess what? They weren’t even close. So wait, these are the smart guys we’re supposed to trust, like, way more than the last guys?

Marketing in a More Frugal Age

Advertising Age has an interesting piece about how marketing people across the country are betting on this recession making permanent changes to how frugal we are as a people and  consumers. I agree with this assertion, with the qualification that it’s not going to be black and white differences unless people need to. But yes, I think people will save more and spend less because of this national experience.

I know that my family has certainly cut back on spending since this whole financial mess has started, regardless of our career status. In fact, I’m fairly certain that my family has had attitudes change more significantly than the average family, so perhaps I’m quicker to jump on the bandwagon of “Yes! Everything has changed!” than most. I’ll have to poll other people I know informally over the next few weeks, especially those that have not had their incomes affected.

Tragedy of Errors

The Financial Post out of the Great White North posted an editorial by Terence Corcoran asking, is this the end of America? Yes, perhaps a bit over the top. But. Is it really? He gets himself out of hyperbolic screed territory by noting that how you define “America” is awfully important, and not just focusing on the two months of disgrace our political class has shown the world. They’re both important. The President has been very forthright that he intends on changing everything. If allowed to skip down the road he says he wants us to go down, America would, indeed, not look anything like it has in the past. A significant minority of people in this country would count this has a great thing, our President and Congressional leadership included.

This paragraph is key:

One test of whether we are witnessing the end of America is how many more times Americans put up with congressional show trials of individual business people and their employees, slandering and vilifying them for their actions and motives. And for how long will they tolerate a President who berates business and corporations as dens of crime and malfeasance? If the majority of Americans come to accept the caricatures of business as true, then America is closer to the end of its life as a global leader, as a champion of markets and individualism.

Here’s the problem: while they try to keep the voter’s eye on the end goal, somewhere in the future, the whole thing is falling apart in the present. It’s not going to work. The end gambit isn’t some post-modern, quasi-socialist better-than-Europe Utopia, but nothing less than hacking off America’s legs and arms, and removing us from the world’s leadership through economic and social destruction. Now, this possible future is way down the road, too. The key is to not get caught up with the promises of a New Day, but pay attention to what’s happening now. If what’s going on in Washington doesn’t pass the sniff test, it probably is what you think it is.