What is Keynesian Economics and why is it so destructive to America’s recovery?

That review was biased tripe of the type you should expect from a biased source like Cato whose only objective is to lower taxes for the richest.

The review relies primarily on a straw man argument -- That the premise of Keyensian theory is to get more "cash" into the economy. That is not the idea at all. The ideal is to get more demand in the economy.

It ignores the difference between having money in a bank account and the money being spent. Having money in a bank account doesn't mean its getting spent and creating demand in the economy, particularly if bank lending is down, like it is in a bad recession like this one. To imply there is no difference between money sitting in a bank or being spent in the economy is simply dishonest.

The video also falsifies facts. The video argues that Hoover was a big Keyensian spender and increased spending 47%.



source: http://www.usgovernmentspending.com/

Hoover was in office 1929-1932. See that 47% increase in spending the video claims?

Me neither.

It's bull(*)(*)(*)(*). If spending had increase almost 50% it would have been up from about $4 billion to about $6 billion. As everyone can see, it wasn't even close to $5 billion in 1932.

The video also claims Hoover raised taxes. Which is not a Keyensian idea at all, but taxes were increased from a 26% top rate when the economy tanked to 63% in 1932 -- three years after the GD raged while the economy tanked. In 1933, with those higher taxes, the economy turned around, and grew on an average of 8.5% (real) for the next 7 years.

As you can see, it wasn't until FDR's New Deal programs that spending took off and the economy stopped tanking and growing again.

The video also claims spending didn't work for FDR any better than Hoover.

I'll let others decide if the fact support that claim:

Year - % chng real GDP
1930 -8.6%
1931 -6.5%
1932 -13.1%
1933 -1.3% <-FDR takes office, spending increases
1934 10.9%
1935 8.9%
1936 13.1%
1937 5.1% <- Spending cut
1938 -3.4%
1939 8.1% <- Spending increase
1940 8.8%

Source data: BEA.gov

Based on the evidence of the GD, it looks like Keyensian spending worked great.

Completely contrary to the video.

It's a very good review. For those invested in a political agenda who don't care about or understand facts or economics.

 

you are very mistaken, akphidelt.

Government spending does not increase productivity.

All government spending does is take water (money) out of one end of the pool and pour it into the other end of the pool and expect the water level (the economy) to somehow rise!

Foolish! very foolish indeed!

It is very obvious you do not have an understanding of workable economic principles!

 

so how do you explain Obama's dissaster?

 

Excellent response, bacardi.

 

When Obama took office, the economy was tanking at a -7% real rate, losing 700,000+ jobs a month, unemployment was skyrocketing, and the stock markets were crashing in the worst recession in 80 years and the economy was headed straight for a depression.

But now the economy has been growing steadily for almost two years, the private sector has created jobs every month for more than a year and a half, stock markets are up about 70% from their recession lows, and the unemployment rate has fallen from above 10% to just above 9%, and 5 million private sector jobs have been added since Jan 2010.

What dissaster?

 

you are assuming that the markets would o kept on tanking indefinately....a highly unlikely scenario as eventually they bottom out as they always do.

What dissaster you ask? The currency crisis the US is heading towards in either 2012 or 2013

 

Oh yeah, the one that you say is going to happen it &#822;2&#822;0&#822;1&#822;0&#822; &#822;2&#822;0&#822;1&#822;1&#822; 2012 or 2013. I almost forgot about that.

 

This is false... Government deficit spending adds money to the pool before it ever takes it. That is simple logic.

And this is exactly why deficit spending is included in GDP calculations because it does in fact count as productivity since money is actually exchanging hands.

 

its quite apperant you will be ill prepared......your loss not mine

 

that depends.....governments can raise money three ways:

1. they can borrow it
2. they can raise taxes
3. they can just print it

the first two take money out of the economy. Sure the government is creating jobs with infrastructure spending etc, but keynessians never stop to think what jobs have been destroyed because now the private sector has that much less money to invest in new factories or machinery etc.

the third is by far the worst, printing it only creates inflation. You increase demend without increasing production, or to put it simply, too much money chasing a finite supply of goods!

 

Actually the bad news peaked as he took office, he unlike Bush came in on the end of a recession.

His policies prevented a recovery form taking hold and have made things worse.

Not like it should, he blipped a little spending a trillion dollars we don't have, but growth is HORRIBLE, this year isn't growing near where it should be during the recovery he has blown.

Have they created enough to bring unemployment down to 6.5%, the worst it got during the recession Bush inherited. Has gotten down the the 5% Bush and the Republicans had it before the Democrats took control of Congress and we operated under their budgets and fiscal policy and threats of massive tax increases?

You been watching it lately, we should be in a full blown recovery and expansion right now it should be 130% higher.

ROFLMAO and it;s been at 9% for TWO YEARS.............that is suppose to be GOOD NEWS.................you embarrass yourself.

And we are 2.5 million short and 25 million out of work most just giving up.

Was that your picture on the cover of Mad Magazine?

 

Things are worse?

Let's remember how much better things were in Jan 2009

January 2009

Job loss: Worst in 34 years
Employers slashed 598,000 more jobs in January [2009] as unemployment rate climbed to 7.6%.

NEW YORK (CNNMoney.com) -- Employers slashed another 598,000 jobs off of U.S. payrolls in January, taking the unemployment rate up to 7.6%, according to the latest government reading on the nation's battered labor market.

The latest job loss is the worst since December 1974, and brings job losses to 1.8 million in just the last three months, or half of the 3.6 million jobs that have been lost since the beginning of 2008.

http://money.cnn.com/2009/02/06/news/economy/jobs_january/index.htm

Market players were also disappointed by reports that U.S. home prices fell 8.7% year-over-year in November, U.S. housing starts fell 15.5% in December, and weekly initial jobless claims rose 62,000 to 589,000.
http://www.businessweek.com/investor/content/jan2009/pi20090122_192905.htm

On Wednesday, the 30-stock Dow Jones industrial average finished with a loss of 248.42 points, or 2.94%, to 8,200.

http://www.businessweek.com/investor/content/jan2009/pi20090114_103250.htm

598,000 Jobs Shed In Brutal January
Unemployment Hits 7.6% as Downturn Picks Up Steam

The need for progress on those fronts seemed more important than ever yesterday, as the Labor Department announced that conditions worsened more than expected last month. The nation's employers shed 598,000 jobs, the most since 1974, driving the unemployment rate to 7.6 percent from 7.2 percent. If the jobless rate keeps rising at the pace it has for the past two months, it will hit double digits in summer and reach its highest rate since the Great Depression by the fall.

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/06/AR2009020601156.html

GROSS DOMESTIC PRODUCT: FOURTH QUARTER 2008 (PRELIMINARY)
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 6.2 [later revised to 7.0] percent in the fourth quarter of 2008, (that is, from the third quarter to the fourth quarter), according to preliminary estimates released by the Bureau of Economic Analysis.

http://www.bea.gov/newsreleases/national/gdp/2009/pdf/gdp408p.pdf[/QUOTE]

Continued Unemployment Claims at Record High
In the week ending Jan. 24, the advance figure for seasonally adjusted initial claims was 588,000, an increase of 3,000 from the previous week's revised figure of 585,000.

http://www.calculatedriskblog.com/2009/01/continued-unemployment-claims-at-record.html

Only a partisan invested in failure for political purposes could say things are worse.

 

Yes since the Democrats took of the Congress MUCH worse.

Yes two years after the Republicans lost the Congress. It was already bad and it's been worse since.

Unemployment STILL over 9% with the REAL numbers even higher as people simply stop looking. GDP almost ZERO. And all the debt he has piled on us. And no recovery in sight.

Hey go ahead and declare we are in HAPPY TIMES AGAIN, it only shows how uncredible your post really are.

 

Only a partisan invested in failure for political purposes could say things are worse.

 

Worse than when the Republican lost control of Congress......you betcha.

Yeah everyone is running around singing "Happy Days Are Here Again"!

Obama has blown, he spent almost a trillion dollars with no lasting results and is asking for more because of that failure. This is probably the longest period of high unemployment since the depression and his policies off no end in sight. GDP growth has gone over the cliff. And all he does is go around and practice his jive talking nonsense.

My what we would give to have the full employment and falling deficits and revenue growth we had after the Bush tax cuts, the correct policy, took effect.

 

40% of the 2009 stimulus was tax cuts, so 40% of the stimulus must have been the correct policy, right?

 

2008q1 -1.8%
2008q2 1.3%
2008q3 -3.7%
2008q4 -9.2% <- This is GDP going off a cliff.
2009q1 -6.8% <-
2009q2 -0.7%
2009q3 1.7%
2009q4 3.7%
2010q1 3.9%
2010q2 3.7%
2010q3 2.5%
2010q4 2.3%
2011q1 0.4%
2011q2 1.3% <- This is not.

You mean starting in 2003 like you always refer to in your arguments?

Why is it whenever you talk about Bush's performance in the WH, you ignore the first three years and start from 2003, on the grounds that he came in on a "recession" under the Republican controlled Congress, yet you think it is fair to judge Obama based upon the far more severe recession he inherited?

Double standards are fair games for the partisans. It allows them to avoid the glaring holes in their positions.

 

I found great pleasure realizing my son sees his father as a leader and independent rather than dependent on the Government. There certainly is nothing wrong with working for somebody, and striving to get ahead. However being a progressive is to be complacent and dependent, it's more or less just rolling over in life... I'm glad my son can be proud of what I have accomplished, it shows in his own accomplishments.
Most Progressives set the bar way too low in my opinion...

 

Your analysis is right on, DonGlock.

"Socialists cry "Power to the people", and raise the clenched fist as they say it. We all know what they really mean — power over people, power to the State."

-- Margaret Thatcher

Socialism is great if you are willing to accept a much reduced standard of living and an oppressive central government who is always telling you what to do and how to live your life to the benefit of the state!

Cuba, North Korea and the old Soviet Union and East Germany are four perfect examples!

 

What kind of tax cuts were they and how do they translate back to job creation?

Remember, the porkulus package was a partisan straight Democrat vote for the most part.

I am fascinated about this chatter from the left about how they passed tax cuts but now that Republicans are in charge we need tax increases; why do you think that is?

 

I find it amusing that people desperate to impugn Bush show equal desperation in supporting Obama. So for this anemic growth rate in GDP we have spent ourselves into an additional $4 trillion in debt and have a whopping $1.6 trillion deficit to pay for; quite the accomplishment I would say.

Only someone living in LaLa land would attempt to suggest that this has been a GOOD three years under the divisive and destructive Obama administration. I would add, an administration given a pass by the lame stream media and supporters like you for $4 gallon gas and pissing away half a billion dollars of tax payer funds on the failed Sylondra promised green jobs.

I can't imagine anyone wanting another four years of this nonsense except for the mentally impaired.

 

Not matching the mental impairment of anyone wanting a return to the wonderful way things went under the last Republican administration.

 

Hey this guy thinks 9% unemployment and two quarters of GDP less than 1.5% is great and we should be singing "Happy Days Are Here Again" yet thinks 52 months of full employment, record revenues, declining deficits down to $161 were HORRIBLE.

Go figger.

 

52 months of solid growth, full employment, growing revenues and deficits declining three years to $161 billion.

NO we wouldn't want that again would we!