So I send my step dad an email in regards to this article: http://www.realclearmarkets.com/articles/2010/08/20/dr_keynes_killed_the_patient_98632.html Here is our email exchange. Edited B/C i realized I left my work email in the message. ------------------------------------------------------------------------------------------------------- From: AM Sent: Friday, August 20, 2010 8:20 AM To: Step Dad Subject: A good article through allegory http://www.realclearmarkets.com/articles/2010/08/20/dr_keynes_killed_the_patient_98632.html ___________________ Allegory is a flexible tool, which can be used to support almost any notion. But if you stop and think about it, the analogy he’s drawing here doesn’t hold up. A person putting too much food in their body is one thing; but it’s not really similar to an economy in recession. The circulatory system, rather than the digestive system, would seem the more apt analogy to a financial system crisis. If the blood stops flowing the patient dies. I think the blood flow to the brains of a lot of Republicans is weak right now. It is common for state governments to run surpluses during good times, so that they can draw on them during bad times. Otherwise, they would have to lay off police, firefighters, teachers, etc. every time there is a recession. The point of much of the stimulus is aid to state governments (many of whom did not have adequate reserves) so that police, teachers, etc. can keep doing their jobs. Republican policies would have us lay off lots more of these people, so that (a) they would be drawing unemployment, and (b) they wouldn’t have as much money to spend (or save). The stimulus also includes funding for lots of other necessary things such as transportation projects, bridge repair (I think it’s a bad thing when bridges collapse), and a “smart grid” for electricity. All of these things are functions government needs to do, and they support the private sector. One thing we know from the past 40 years is that Republicans run bigger deficits than Democrats. Dick Cheney: “Reagan taught us deficits don’t matter”. I believe recessions are a time when governments should run deficits as a general rule, and good financial times are when we should run a surplus, pay down debt, and prepare for future contingencies. (Eisenhower was the last republican who seemed to understand that.) Al Gore, in the 2000 campaign, argued that we should use the surplus to pay down debt and prepare for Baby Boomers retirement; that was the responsible approach, which of course Bush & the Republicans laughed at. Now Republicans want to return to the policies of the Hoover administration. Hoover’s response to the Great Depression was essentially that of “Dr. Hayek” in the allegory. That didn’t work out so well. Short-term deficits, especially in a recession, don’t worry me. Long term deficits are another matter, and it will take a combination of spending cuts and tax increases (to around 1990s levels) to address that. The problem is that the spending cuts which will matter are not the “pork” one hears about, but changes to very popular programs (entitlements) which the people at the Tea Party rallies don’t want touched. It wouldn’t require major changes to these programs to significantly alter long term deficit projections. Also, drawing down the level of spending in Iraq and Afghanistan, as Obama plans to do, will reduce deficits as well. RealClear is basically a FoxNews view of the world. Most economists say the economy is better off because of the stimulus than it would have been without it. Of course, there are a few dissenting economists, associated with………you guessed it……………the Hoover Institution! Anyway, the patient isn’t dead, although he was left in pretty bad condition by Dr. Bush. When the patient tried Dr. Hayek’s medicine, from 1929 to 1933, he almost died. Most doctors think he’s better off under Dr. Keynes’s treatment than he would have been without it. Have a good weekend, Step Dad
And you let your mom marry this hippy?
He would have a good point if Hoover had actually used the Hayek’s economic policies to make policy decisions during the early stages of the GD…since this wasn’t what in fact what occured, it undercuts the whole premise of his argument. It also assumes a binary system, where it’s 100% Keynes/0% Hayek…and vice versa. There were, during the GD and now, a huge spectrum of economic policies that we have to choose from. Tell him to read David Kennedy’s “Freedom From Fear: The American People in Depression and War” a slightly left leaning historian from Stanford (not the Hoover Institution wing), and Amity Shlaes’s “The Forgotten Man” (who does tend to lean right), and you’ll see that Hoover was no bastion of limited gov’t and laizze faire economics…He came out of the Progressive (think Bull Moose) wing of the Republican Party, hardly known for leaving business and the economy to it’s own devices. Beyond that, he has a good point about deficits while the Republican’s held the reins of power, though i’m not sure I’d make the argument considering the size and scope of new deficits we’re now running (under a purely Dem gov’t) and will be running when the boomers begin retiring in mass. A good documentary about the untenable situation we face in terms of those ever-popular entitlements is “IOUSA”. It’s completely non-partisan and produced by the head of the GAO under both Republican/Democratic adminstrations. Pretty scary stuff unless we start growing the economy at unrealistic levels.
ASSet_MANagement Wrote: > Edited B/C i realized I left my work email in the > message. Too late, the world knows what it already knew.