It's Hayek's World, the U.S. Government Just Spends in It

As the guilty flee when no man pursueth, so do the statists see Austrian economists' cold dead hands trying to take away their (metaphorical, until they are literal) guns when our country's politicians are all too prepared to Keynesian manage their way to all of our graves.

See E.J. Dionne in yesterday's Washington Post:

today’s conservatives are in thrall to Austrian thinking, and this explains a lot of what is going on in Washington. Broadly popular measures such as raising the minimum wage and extending unemployment insurance — normal, bipartisan legislation during the Keynesian heyday — are blocked on the assumption that people are better off if the government simply keeps its mitts off the market.

It is now difficult for Congress to pass even the kind of spending that all sides once saw as necessary public investment in transportation, research and education. It’s that “road to serfdom” again: Anything government does beyond enforcing contracts and stopping violence is denounced as the first step of a fox trot toward dictatorship.

So let’s give Ron Paul credit for unmasking the true source of gridlock in Washington: Too many conservatives are operating on the basis of theories that history and practice have discredited. And liberals have been more reluctant than they should be to call the ideological right on this, partly because they never fully got over the shell shock of the Reagan years and also because they have a strange aversion to arguing about theory. When it comes to government policy, the Austrian economists paved the road to paralysis.

Hm, what did the Congressional Budget Office say about government spending last week? "Federal outlays are expected to increase by 2.6 percent this year, to $3.5 trillion, or 20.5 percent of GDP—their average percentage over the past 40 years. CBO projects that under current law, outlays will grow faster than the economy during the next decade and will equal 22.4 percent of GDP in 2024." Is this a government gridlocked, prevented from functioning?

And is asking, as congressional Republicans are, for offsetting cuts elsewhere before voting for unemployment extensions truly a sign of embracing Austrian warnings about the bad effects of messing with free markets and market clearing in a way someone not desperate for a column hook would recognize?

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  • Raven Nation||

    Good lord, where do you even start with this pile of crap:

    today’s conservatives are in thrall to Austrian thinking
    I wish.

    It is now difficult for Congress to pass even the kind of spending that all sides once saw as necessary public investment in transportation, research and education
    You are correct EJ. Government spending is declining precipitously.

    And liberals have been more reluctant than they should be to call the ideological right on this
    True. There is no one criticizing the right.

    There was some old conspiracy guy of whom it was said, "Every time he speaks for an hour, it takes a day to undo everything he's got wrong." EJ is pretty similar.

  • -Umbriel-||

    theories that history and practice have discredited

    Which he's claiming happened when, exactly?

  • PapayaSF||

    And the old "FDR got us out of the Depression" crap.

  • Tony||

    When it was clearly austerity/laissez-faire economic policy that did it!

  • Pelosi's Rabbit||

    Happy drag hammer test situation.

  • ||

    It’s that “road to serfdom” again: Anything government does beyond enforcing contracts and stopping violence is denounced as the first step of a fox trot toward dictatorship.

    Well, Road to Serfdom and/or Soft Despotism Where Everything Requires State Permission was too wordy of a title.

    Broadly popular measures such as raising the minimum wage and extending unemployment insurance

    Citation needed. Approval for those things drop percipitously when you include the caveat that, oh yeah, these things might have negative, unforeseen consequences.

  • ~Knarf Yenrab~||

    In a world where half of professional "economists" believe that raising the minimum wage won't decrease employment ceteris paribus, it's difficult to believe that the average voter, who has little incentive to know anything about politics or economics and typically can't even name the three branches of the government, would understand why raising the minimum wage would cause more unemployment.

    Increasing the minimum wage is always a favorite move for the populist socialist regardless of whether it increases unemployment. You either get the plaudits of being a hero to the poorest of the working class without hurting employment figures, or you hurt employment and put more people on the dole, gaining your party more votes when you promise to extend and expand benefits to those poor devils who can't find work because market economies are just so darn unstable without government regulation.

  • The Last American Hero||

    3 branches? More like 1 and a half by my count.

  • Dweebston||

    Does that include economists who preamble their treatment of minimum wage with the caveat that increasing a price floor to a point below which most producers currently sell is going to have negligible impacts on the amount consumed?

  • ~Knarf Yenrab~||

    Polls generally don't allow preambles, and virtually all lefty arguments in favor of raising the minimum wage depend on monopsony, which is how you have seven recipients of the Sveriges Riksbank Prize advocating a $2.85 bump.

    Austrians who reject macro root and branch are mostly content to roll their eyes.

  • ||

    As if there is some sort of monoposony in the fast food industry....

    Oh dear, if McDonald's doesn't hire me, who, oh who, can I possibly work for?

  • PapayaSF||

    I think it's important to bring up, in every discussion of the minimum wage, that the original Progressive reformers intended it as a eugenics measure:

    Progressive-Era reform economics, like the regulatory state it helped found, was influenced by a popular, biologically based movement for social and economic reform – eugenics. Progressives justified regulation of labor relations by arguing that the superior, deserving poor could be uplifted only by removing from the labor force groups deemed biologically unfit – groups they called “unemployables.” “Unemployables,” were seen by labor reformers less as victims of low wages than as the cause of low wages. Many progressives, including some of the influential women who led them, deemed women “unemployable,” arguing that working women improperly abandoned their eugenic duty as “mothers of the race,” and wrongly competed for jobs that “family-wage” progressives argued rightfully belong to men. These reformers advocated exclusionary U.S. labor legislation for its beneficial eugenic effect – moving women out of paid employment and into the home.
  • PapayaSF||

    More:

    No historian of economics will be surprised to find the great reformers of Progressive Era economics, many of them leaders of the AALL, at the forefront of American labor reform. The surprise would be if Richard T. Ely, John R. Commons, Henry R. Seager, Sidney and Beatrice Webb, and John B. Andrews somehow opposed the minimum-wage, maximum-hours, and working-conditions legislation that they dedicated so much time to promoting and enacting. What is more surprising is that these leading progressives campaigned for labor reform while also maintaining that restrictive labor laws, such as legal minimum wages, would disemploy poor workers. Moreover, these progressives argued that minimum-wage-induced disemployment was a social benefit. Legal minimum wages and other statutory means of inducing undesirable groups to leave the labor force were, in the progressive view, a eugenic benefit. A legal minimum helped the deserving poor by removing from employment the undeserving poor, who, by virtue of their hereditary infirmities,were wrongly dragging down the wages of the better class of worker (Leonard 2003a). Sidney and Beatrice Webb put it plainly: “With regard to certain sections of the population [the ‘unemployables’], this unemployment is not a mark of social disease, but actually of social health” (Webb and Webb [1897] 1920: 785).
  • Invisible Finger||

    or 20.5 percent of GDP—their average percentage over the past 40 years.

    I believe the average percent is 18, based on an article Nick Gillespie did in Reason (or H&R) a year or two ago. So 20.5% would actually be an increase of exactly the type E.J. Derponne wants to see.

  • Caleb Turberville||

    I don't know if this has any bearing on the topic at hand, but isn't GDP a meaningless number? I know Austrian schoolers don't particularly like it because it fails to take into account monetary pumping from the government. A government might spend $1 billion to build a pyramid, but that doesn't equate to utility or an increase in the overall wealth.

  • SweatingGin||

    18% is average revenue, iirc

  • ~Knarf Yenrab~||

    Mssr. Boudreaux responds (forcefully):

    http://cafehayek.com/2014/02/s.....rians.html

    Russ Roberts responds in a different post:

    Keynes is dead but somehow, between 2009 and 2012, federal deficits were over a $1 trillion every year. We’ll see about 2013, it may be less. That government spending as a percentage of GDP was only 25% in 2009 and above 24% in 2010 and 2011–the highest levels since WWII–was evidently due to lawmakers being in thrall to Austrian thinking.

    In short, Dionne is an idiot.

  • SForza||

    He never has been one to let facts get in his way.

  • Qui?||

    Helmet reference?

  • Brian||

    Broadly popular measures such as raising the minimum wage and extending unemployment insurance — normal, bipartisan legislation during the Keynesian heyday

    I love how Keynesian theory has been distorted into having the government spend more and more money until utopia, or until they can't (for whatever reason).

    I thought the Keynesian idea was to smooth out recessions with temporary deficit spending. Instead, the argument is "We must adopt whatever socialist policies we like because...Keynes!"

  • RightNut||

    Wasn't their an article on Reason a few years back about how Keynes would be spinning in his grave if he knew about the deficits the US and others had run up in his name?

    I'll see if I can find it.

  • RightNut||

  • Killaz||

    He was pretty much spinning in his life at how General Theory was taken to by idolaters.

  • ~Knarf Yenrab~||

    I liked this bit from Red Rocks Rockin from the Clinton thread:

    Dionne's drek reminds of the remark Keynes made about him being the only non-Keynesian in the room after meeting with a group of American economists.

    As bad as Keynes may have seemed to those who preferred the Austrian methodology, he didn't have the econometrics fetish of neo-Keynesians and wasn't a fan of increasing aggregate demand via counter-cyclical policies. It's no wonder Hayek spoke of him highly--everyone who adopted his name turned out to be Hayek's mortal enemy, whereas he got along relatively well with Keynes from his lonely Austrian perspective.

  • Paul.||

    I thought the Keynesian idea was to smooth out recessions with temporary deficit spending.

    And then reduce the deficit to nothing during good times.

    However, in defense of our progressive friends, a quick perusal of any major newspaper finds one bereft of good times.

    Fun party game: Google search any newspaper and find a year when we weren't in the GREATEST BUDGET CRISIS EVAR!!11!!!

  • SweatingGin||

    Nah, we're almost to the next summer of recovery. By late next month we'll be seeing green shoots.

  • Sevo||

    I've lost count; is this the 5th summer of recovery?

  • ||

    It's strange how we never actually get to the "good times", even while we continue to spend more to get there.

    How can you be counter-cyclical, if you never get to the other part of the cycle?

  • Paul.||

    See E.J. Dionne in yesterday's Washington Post:

    Oh hey, the second half of NPR's itinerant liberal minstreals!

  • ||

    I know. I can actually hear him in my head as I read the passage above.

    Please make it stop!

  • Sevo||

    ..."Broadly popular measures such as raising the minimum wage and extending unemployment insurance — normal, bipartisan legislation during the Keynesian heyday —"...

    So did he laugh when he typed that? Or is he so deluded he didn't realize it's a lie?

  • ||

    I just finished reading Dionne's article.

    Damn, that was some stupid shit.

  • RishJoMo||

    Dude makes a ll kinds of crazy sense dude.

    www.GoAnon.tk

  • ||

    And I don't know if you guys already knew this but the Progressives are justifying the CBO report about Obamacare destroying jobs by saying that people won't have to work as hard and thus can have more leisure time. Bill Maher and his leftist cohorts used this talking point on his show last week.

  • Steve_J||

    But Hayek was wrong! The British people did NOT become serfs.

  • Killaz||

    Did you see the DHS dance at the 2012 Olympics? At least serfs had their dignity.

  • ||

    Why do you even bother with the tired hack that E. J. Dionne aspires to be?

  • ||

    It is now difficult for Congress to pass even the kind of spending that all sides once saw as necessary public investment in transportation, research and education. It’s that “road to serfdom” again:

    No, actually, it's the entitlements squeezing everything else out, as you well know.

  • PapayaSF||

    Is he really saying the government spends little on "transportation, research and education" compared to the past?

  • Dr. Paul Krugman||

    Keynes was clearly subject to delusional austerian thinking. Keynesian macro can clearly demonstrate how Keynes was truly misguided.

  • Cytotoxic||

    We don't get many bones thrown our way, but I got to say I sure am glad the unemployment insurace extension expired without renewal.

  • eyeroller||

    And is asking, as congressional Republicans are, for offsetting cuts elsewhere before voting for unemployment extensions truly a sign of embracing Austrian warnings about the bad effects of messing with free markets

    This would be a much better way of putting it:

    Is the willingness of congressional Republicans to spend more on almost everything, almost all the time, truly a sign of Austrianism?

  • JD the elder||

    "It is now difficult for Congress to pass even the kind of spending that all sides once saw as necessary public investment in transportation, research and education."

    ...the hell?

    Department of Transportation
    FY2012 Request: $128 billion
    FY2011 Request: $79 billion
    FY2010 Enacted: $77 billion

    Department of Education
    FY2012 Request: $77.4 billion
    FY2011 Request: $72.9 billion
    FY2010 Enacted: $64.1 billion

    I'm not even going to bother with "research" since that's so broad and vague it would be hard to define, but I really want to know how over $140 billion in spending for FY2010 is evidence that it's really hard for us to spend any money.

  • cheap kits||

    I thought the Keynesian idea was to smooth out recessions with temporary deficit spending. Instead, the argument is "We must adopt whatever socialist policies we like because...Keynes!" That's what I thought

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