Great Recession

How Long Will It Take Keynes to Die?

You won't find out by reading America's newspaper of record.


It's been many years since I've read The New York Times. Like most readers, I got discouraged by the shrinking page size, the self-confident erroneousness that becomes apparent whenever America's newspaper of record covers a topic I'm familiar with, and the lack of a comics page. Sure there are occasions when you can't avoid it—usually when enough people are complaining about an article or when somebody I know is in the paper—but on a daily basis I follow the golden rule that life is just too short for The New York Times.

So imagine my surprise the other day when, challenged by a third-world Internet connection and enticed by an old-school six-column page width, I picked up a $2.65 copy of the International Herald Tribune, which partially reprints The New York Times, only to discover that the paper a) no longer bundles that day's edition of the Beirut Daily Star (my actual purpose in buying it), b) has jettisoned the last memory of its fabled Big Apple namesake by calling itself "The Global Edition of The New York Times" and c) features the kind of groupthink rarely seen outside a French parochial school.

While the rest of hyperconnected, interweb-powered planet Earth has now seen Keynesian economic intervention tested in real time and discredited beyond any intelligent doubt, the Times, I quickly learned, is a walled garden where the ideas of John Maynard Keynes remain not only viable but so evidently true as to require no factual support.

Two economists who are just as relevant today as they were in 1944.

You may know Keynes as the brilliant mid-20th century economist whose general theory of employment was said to have undergone a revival in 2008, though in fact it had never gone away. You won't know Keynes very well from reading the Times, but only in the sense that you won't know Christianity very well if you never meet any non-Christians. Economic intervention is the air the Grey Lady breathes. In the opinion pages of the edition I looked at, perennially perturbed Nobel laureate Paul Krugman decries the "so-called urgent need to reduce deficits" and asserts without documentation that a "real response" to the global correction must involve precisely the medicine that has so far proven ineffective: stimulus for infrastructure and government schools, taxpayer-funded payoffs for mortgage deadbeats, and an "all-out effort" by the wildly popular Federal Reserve.

In a business column, It's a Wonderful Life star James Stewart compares 2011 with 1938, briefly debating whether Depression-era stimulus saved the economy or would have saved the economy if it were larger. Stewart ultimately decides that Franklin Roosevelt's spending cuts (prompted, naturally, by "strident calls" from Republican dead-enders) doomed a nascent recovery. Humorously, Stewart quotes disgraced former CEA head Christina Romer's two-year-old warning against "the urge to declare victory"—leaving readers to puzzle over what economic policy from 2009 could possibly have been considered a victory.

In another opinion page column on "outrage," somebody named Roger Cohen laments the plunging stock markets' effect on Europe's August vacation schedule while chastising Germany for growing "tired of others' problems" and turning "parochial at the very moment its leadership is needed." Cohen accounts for Germany's relatively strong economic position by noting that the country has "invested in a highly educated workforce" and also "fostered cooperation between labor unions and employers and between industrialists and the government in defense of German jobs." Missing from this equation is Germany's longstanding aversion to inflation, which has frequently placed communist-educated Chancellor Angela Merkel to the right of the American president on economic matters.

And in a front-page "News Analysis" (praise Allah we can still count on those!), reporter Jackie Calmes warns that despite the "boasts of Republicans" who may or may not have mildly slowed the growth of federal spending during the debt-ceiling compromise, "well-known economists, financial analysts and corporate leaders, including some Republicans…are expressing increasing alarm about Washington's new austerity." Not to be outdone by Stewart's citation of the career-dead Romer, Calmes brings in an actual corpse: cadaverous former Treasury Secretary Henry Paulson, whose panicked, catastrophic response to 2008's years-overdue financial correction should have disqualified him from commenting on anything more complicated than the Peterson Field Guide to Birds.

Even in the truncated version of the Times available in the IHT, there's plenty more like that, including this extended metaphor from Pimco's Bill Gross: "An anti-Keynesian, budget-balancing immediacy imparts a constrictive noose around whatever demand remains alive and kicking." Nowhere in the percentage of the paper I finished (unlike the stingy Times, IHT carries the Jumble) was there any room for the anti-Keynesian sentiments the paper's news and opinion sections continually referred to without ever engaging. At no point did anybody ask the questions the rest of us have had to contend with for more than three years now:

Is it possible that the choice between budget-balancing and job creation is a false choice?

Does government actually create jobs?

Is there any reason to believe at least $2 trillion in fiscal stimulus and $2.9 trillion in monetary stimulus since 2008 have made a positive difference in the economy—especially considering that most economic indicators are worse than the worst-case scenarios that were made public when those spending decisions were approved?

How does a deal that contains no actual cuts, adds to an existing $14 trillion pile of public debt, and preserves spending for cowboy poetry qualify as an "austerity" budget?

And how many times can the Keynesian consensus fail the test of outcomes before it goes away for good?

Outside the airless chambers of the Times' fancy new headquarters (half of which the company had to sell at a fire-sale price just two years ago after completing the building), these questions have been active for some time now. I've been documenting the advent of the "true Keynesian" argument, in which acolytes claim the problem is not with the First Baron's theories but with a reality that doesn't fit them. Krugman, the doctor, attempted something like this the other day in this blog post accusing anti-Keynesians of misstating the master's theories.

That's a fair complaint, and Keynesian theory is considerably more nuanced than the cartoon version favored by both contemporary followers (who among other things ignore the admonition to reduce deficits during economic booms) and detractors (who tend to believe any waste of public money qualifies as Keynesian stimulus).

But even here Krugman's compulsion to ignore facts shows up in his description of "an economic model under which temporary increases in government spending can, under certain circumstances, help reduce unemployment." Whatever you want to call the American Recovery and Reinvestment Act (ARRA), or TARP, or the GM bailout, or whatever monsters the debt-ceiling compromise has created, they are all increases in public spending. In the case of ARRA the increase was arguably designed around and inarguably advertised as job creation. (Must we really go through the whole "saved/created/funded" dance again? That one stopped being funny two years ago.)

This is the kind of laziness that sets in when you never have to entertain a serious challenge to your ideas. It's remarkable given that the ballyhooed and short-lived return of Keynes was not merely rhetorical. These ideas were put into action, at a cost of trillions of dollars that will someday have to be paid back. The result was either a recovery too microscopic to notice or no recovery at all. Everywhere except the Times, people have noticed. The rise of the Tea Party, the three-fourths majority in favor of a federal spending cap, and the midterm election results were all evidence that Keynesian intervention is no longer a marketable idea. 

There are few things less relevant than a newspaper, but many people, possibly hundreds, still take The New York Times seriously, and they're being disserved when the paper misses an important shift in economic theory. The long-defunct economist was brought out for a final bow—a courtesy the Muscular Dystrophy Association won't even extend to Jerry Lewis—and the result left audiences cold the world over. Keynesian mysticism—with its fancy equations, its cramped vocabulary of "liquidity traps" and "irreducible uncertainty," and its pre-Copernican belief that a group of wise men in a central office can decide what "aggregate demand" should be among hundreds of millions of people—is over. At this rate the borough of Milton Keynes could be renamed Milton Friedman by the end of the year. To ignore that story is a serious dereliction by a publication that, with its tiny and nearly-square pages, has already failed in the most serious duty of any newspaper: providing material to make paper boats.

Tim Cavanaugh is a senior editor at Reason magazine.

NEXT: Would It Be Better to Pull the Debt-Deal Trigger?

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  1. Thank you Cavanaugh! Now I can YET again release my army strawmen on your hapless, hopeless, utterly stupid and assinine commentators!

    1. assinine

      Why is it always about the ass with you?

    2. Austrian School rules!

  2. The only good Keynesian is a spent Keynesian.

    1. Ah, he’ll just print more.

      1. Or borrow more…

  3. Sadly, Keynes won’t die. As the above article shows, people are more than willing to ignore real world results of policies.

    People will never admit that something didn’t work, not when they can simply make the argument “we didn’t do it big enough” or “the world would have been worse off if we hadn’t done it.”

    1. It’s TEH TEABAGSTERDZ FAULT!!!!1one!!

      Keynes gave government a path to spend unlimited amounts of public cash on pet projects for “the good” of the people.

      No matter how much failure is observable in the real world as a result of Keynesian policies, they will NEVER give that route of legitimization up.

  4. In the long run, everyone else is dead.

  5. In the long run, we’re all debt.

  6. Keynes died back under Reagan, when the GOP decided to run pro-cyclical “full employment deficits” while the economy was booming, instead of counter-cyclically keeping revenues up and spending down as per orthodox Keynes.

    Now that the economy is in a rut and needs a counter-cyclical policy of deficits and tax cuts, we find ourselves already too-deeply indebted and already anchored to record-low tax levels. Oh, well.

    It would be nice if the GOP had not, for the past decade, maxed out America’s credit limit down at the corner Chinese Payday-Lender Emporium and called it a “tax cut,” but that’s where we are.

    Unemployment is up, and it’s going to stay up, because no smoke-blowing helmet-hair GOP wannabe is going to tax cut or deregulate this country back to full employment anytime soon.

    The best we could hope for now is a compassionate triage in which government transfer payments are means-tested and needs based (yes to food stamps, no to corn subsidies). But I expect a much more mean-spirited and disorderly process than that.

    1. Team Red did it!!! This blaming one side for the obvious mistakes of both sides is childish and absurd. Take off the blinders. Both parties are war-mongering, debt-craving statists. They are all in bed with banks and special interests. The welfare/warfare state cannot survive without central banking and Keynesian hocus pocus.

      Keynesianism has never worked, and it cannot. I’m amazed that before the crisis the left was disgusted by crass consumerism and the credit card culture, but now after the crisis (or in the midst of it) that is all they call for. Consumption and more consumption.

      Go max out your credit cards on trinkets and then take out loans to blow in Vegas. Stimulate the economy with your own money. See how much better off you are afterwards. I know, I know, it’s all different when we do it as a group.

      Krugman is a shill for the status quo and corporatism. Why were free market advocates the only ones to see the crash coming? Where was he then? He could’ve been one of the members of the Politburo. His economics are just as sound.

      1. Blaming everbody is the functional equivalent of blaming nobody. If it’s everybody’s fault, it might as well be no body’s fault. Same difference.

        Keynesian “hocus-pocus,” as already noted, would have meant NOT RUNNING UP DEFICITS while the economy was hot. If that’s hocus-pocus, we could have used a lot more of it over the past three decades.

        1. You don’t get Sooner’s point, Mr. Urinating In Their Urns. Neither he (nor I) would assert that “everybody” is at fault. We assert that many, many people — some we can name, others we can’t, some that were observed, others that weren’t, and so on — are at fault, not just W And His Evil Minions. Perhaps it would be better to say it’s a “two-party problem.” In the meantime, we’ll work on that precise list of names for you.

        2. You have no idea what you’re talking about.

          Reagan ran deficits in response to a recession.

          Bush I ran up deficits in response to a recession.

          Bush II ran up deficits in response to a recession.

          In each of these cases, if you graph the deficit amount overlying the unemployment rates, you will see clearly that the deficits both rise and fall in direct proportion to the unemployment rate (only exception is late in Bush II, when the Dems won the congress, jacked up spending, and Bushie went along to try and keep the pressure off his wars).

          It was textbook Keynesianism.

          And it’s also the reason we’re in this mess. Very simply, Keynesian deficits do not lead to healthy economies, they lead to a new, larger bubble, which in turn leads to more Keynesian deficits, and so on and so forth, until your economy collapses. The reason for this is because these recessions have nothing to do with aggregate demand, but are the result of structural capital misallocations. The demand is there, but producers don’t know where it is. Government deficits only exacerbate that uncertainty.

          1. We ran federal budget deficits for all of one or two of thirty years. We only had a surplus, nominal in size, for one or two years at the tail end of Clinton’s presidency.

            You’re saying we were in recession for 28 years?

            No, I don’t think so.

            1. Unemployment under Reagan, following the ’81-83 mess, rose to 11% and did not fall back under 6% until 1988. We did not return to full employment at any point during his presidency. However, the size of his deficits FELL as the unemployment rate fell. Textbook Keynesianism.

              The next recession came under Bush I, but the truth is, we had never fully recovered from the ’81 recession ( almost, though, unemployment “bottomed out” at 5% in 1989, which isn’t high, but is still not “full employment”). When that recession came Bush’s deficit spending increased. Textbook Keynesianism.

              Clinton ran deficits early, because we were still recovering from the Bush I recession. Toward the end of his term, we finally reached full employment. At that time we ran a small surplus for couple years.

              Bush I inhereted from Clinton an economy on the brink of recession. When that recession came, he ran deficits. Textbook Keynesianism.

              But a picture is worth a thousand words. Look at a graph of the unemployment rate overlaid over the deficits. You will see they correlate exactly.

              1. So now Keynes means running 12-figure deficits whenever unemployment is a tick above 5 percent? That’s quite a rewrite, KPres.

                Having unemployment above 5% is not “contractionary” and does not require a “counter-cyclical” deficit policy.

                1. What about 6%, 7%, 8%, etc, etc? That what they were throughout 90% the 80s.

                  It was 5% for all of one year. Your position, I’m assuming, is that if we’d have had a $100 billion surplus that ONE year everything would be wonderful today because we could easily cover Obama’s $1.6 trillion yearly deficits? How the fuck is that?

                  There is absolutely no denying that government deficits have correlated exactly with the unemployment rate. It is textbook Keynesianism.

                  1. You’re talking like the only time to run a surplus is when you are exactly at full employment or, impossibly, above full employment. That’s bullcrap. Keynesian orthodoxy most certainly does not justify 30 straight years (minus one or two) of deficit spending, with not a single year of substantial surplus or paydown, under conditions that have prevailed in the United States for the past three decades.

                    Have fun beating up your homemade scarecrows.

                  2. You’re talking like the only time to run a surplus is when you are exactly at full employment or, impossibly, above full employment. That’s bullcrap. Keynesian orthodoxy most certainly does not justify 30 straight years (minus one or two) of deficit spending, with not a single year of substantial surplus or paydown, under conditions that have prevailed in the United States for the past three decades.

                    Have fun beating up your homemade scarecrows.

            2. “You’re saying we were in recession for 28 years?”

              No you idiot.

              Recessions are officially measured by GDP growth. Keynesianism calls for deficit spending in response to the unemployment rate, because unemployment represents unused labor capacity.

              Technically, we’re not in a recession right now. Yet all the Keynesians call for more deficit spending. Why? Because of the UNEMPLOYMENT!

          2. It was textbook Keynesianism.

            Well, except for the part about actually paying off the debt when times are good.

            Running a huge deficit when times are bad – textbook Keynesianism.

            Running a smaller deficit when times are good – not textbook Keynesianism.

            1. No dumbass.

            2. “It was textbook Keynesianism.

              Well, except for the part about actually paying off the debt when times are good.

              Running a huge deficit when times are bad – textbook Keynesianism.

              Running a smaller deficit when times are good – not textbook Keynesianism.


              The other problem is that much of the deficits was used to finance non capital assets. It’s much easier to make the case for using defict spending to finance something like the Hoover dam during a recession. At least then the people that pay for the debt will get something out of it.

              But most of that deficit went towards regular consumption spending (in particular this was a problem with the recent “stimlus”.

          3. I agree. I like what one wag did with Krugman’s suggestion that if we were invaded by aliens and it turned out there were no aliens…. he substituted “Saudi terrorists” and war on terrorism for alien invasion.
            Tremendous deficits….and why aren’t we all estatic from all the deficit spending?

    2. “Keynes died back under Reagan…”

      Keynes died under Keynes.

      None of his stuff ever worked from the get go.

      1. Politically, Keynes was a failure. Nobody was going to keep taxes up and deficits down while the economy was hot. Lo and behold.

        1. So are you claiming that Keynesean economics WOULD work if it was properly implemented or are you saying no one knows whether it COULD work because it has never been properly implemented?

          1. Well, counter-cyclical economic policy certainly could work if it were implemented scrupulously. By the same token, Chris Christie would have six-pack abs with proper diet and exercise. To the extend that Keynesian economics is sound counter-cyclical policy then, yes, in theory, it could “work.” (“Work” = economic growth/progress with best possible mitigation of severe downturns.)

            1. Yep, it worked wonderfully early in the 00’s when we blew up a housing bubble that got us out of the crash (as per Lord Krugman’s recommendation)!

              Go back to the NY Times and comment there. Paul loves to hear people regurgitate his own nonsense.

              1. Kenyses had very little to do with the housing bubble. That was mainly caused by too low interest rates (monetary policy) and lax lending standards (often pushed by government regulators).

                Tax cuts were enacted, but I think there effect on housing was probably minimal.

            2. Well until such time as it actually tried “scrupulously” there isn’t any proof at all of the validity of the theory.

        2. So, what is the point of it, then? Rational saving is countercyclical. The reason that central government/bank fuckery is promoted instead is not because it’s more effective, but because it gives power and wealth to the elite.

  7. The fact that Krugman remains employed by The New York Times is proof of the decline of journalism in this country.

    1. Yes, because being right about everything is so damned irresponsible.

      1. There is no evidence that Krugman has ever been right about anything since he started his gig at the Times.

        1. “There is no evidence that Krugman has ever been right about anything since he started his gig at the Times.” [**]


          Actual record: 15 out of 17 correct predictions.


          (see p. 18)

          1. To be fair, who can wade through the histrionics and name-calling of your average Paul Krugman column? I mean, I’ll take your word for it that he makes actual predictions and substantive statements, but damned if I’m wading into that morass looking for them.

          2. All I see is a picture of a scrotum.

          3. Correct 15 out of 17 correct predictions….does that include the rally to defeat the space aliens command economy plan?

          4. What were the questions. I’d love to see his predictions.

          5. The ability to predict the blindingly obvious is not the same as being right about substantive policy matters.

            Run along, now, sonny.

            1. One thing that is “blindingly obvious,” Ballchinian, is that your initial assertion was flat-out wrong and now you are trying to cover with bluster and condescension.

              How about if you run along, and take your smoke-blowing machine with you, while I stick around here and keep real.

              1. What are you, like, twelve, yearning to win the Pedant of the Month award?

                Okay, fantastic: Paul Krugman, as an observer of politics, has made a 17 predictions of which 15 later turned out to be true. Hooray for him. My statement that “he has never been right about anything” is literally inaccurate.

                Meanwhile, in the real world, anybody seeking to formulate rational public policy could do worse than to read Krugman’s column and do precisely the opposite of what he recommends.

                Now go play in traffic.

                1. “…do precisely the opposite of what he recommends…”

                  Stay in Iraq?
                  Elect McCain/Palin?

                  Thanks but no thanks.

                  1. Stay in Iraq?
                    Elect McCain/Palin?

                    Thanks but no thanks.

                    Isn’t that what Krugman would advise?

                    McCain: Noted big government conservative who was instrumental in TARP.

                    Iraq: Stimulus multiplier! See: FDR, Great Depression and WWII.

                  2. Stay in Iraq?

                    … and murder a whole heaping bunch of us, too! Don’t forget THAT!!!


                    2. You’re all half a world away, and ineligible to vote in ’12. You’re worthless. Fuck you.

                    3. Ahhhhhhhhhh… the pause that refreshes!

                    4. Ah, the griefers. I was wondering when they’d show.

                  3. Paul Krugman told me if I voted for McCain/Palin, we’d stay in Iraq. I voted for McCain/Palin and sure enough he was right. I guess this counts as one of the 15 predictions.

              2. What were the predictions Krugabe was “right” about? The study doesn’t say.

            2. The ability to predict the blindingly obvious is not the same as being right about substantive policy matters.

              Perhaps not, but the inability to do so is a guarantee of being wrong about policy.

              1. No, the inability to predict the blindingly obvious is a guarantee that your policy prescriptions will be adopted at some point in the future.

                1. Oh, my mistake, I simply paraphrased your comment.

          6. Actual record: 15 out of 17 correct predictions.

            So in ten years Krugabe has averaged 1.5 correct predictions per year.

            Or 0.014 correct predictions per column.


            By progressive standards that makes him some kind of oracle.

          7. Of course, since they don’t bother to give you the raw data that they’re supposedly analyzing, or tell you what constituted being “right” or “wrong”, that paper is pretty crap.

            There are also some gems like this: “In order to measure our partisanship variable, we surveyed the Hamilton College Government Department faculty and students, asking them to place each prognosticator on an ideological spectrum.” If that’s what passes for scientific analysis in the Hamilton College Government Department, no wonder political analysis is so worthless these days.

          8. The paper cited was written by 4 college seniors. (Oh, boy.) No analysis is cited to rule-out selection effect (author bias); there is no list given as to which articles were cited; no list given as to which were not. The plan and selection of articles was done after-the fact. It thus has as much validity as a prediction by Kreskin.

          9. How long has he been writing for them and he’s only made 17 predictions? I thought he was a little more imaginative that that.

          10. Nancy Pelosi got high marks on this ‘study’. Take from that as you like.

          11. Wow. Somebody put pdf online that says Krugman and a bunch of other lefties were right a whole lot, but doesn’t tell us what the actual predictions were. It surrounds this press release with methodology statements and aggregate analysis.

            Pseudo-random question: did you fall for the card trick where the magician asks you to pick a number between 1 and 5, you do, and he takes a card with the number on it out of his hip pocket?

            I.e., couldn’t we have retrofitted Rush Limbaugh’s face on the same analysis, with the same “oh wow” from the gullible reader?

        2. That reminds me, there was some guy at National Review Online ( I can’t remember his name) that ran a “Krugman truth squad” for a number of years. They had old Krugman bobbing and weaving all over the place trying to cover up and spin his crap.

          1. Yeah, that would be Donald Luskin, the guy who’s predictions about the 2008 meltdown landed him on more than one “ten worst” lists for that year.

            Suck on this, NRO-boy:


            1. Which has no bearing on his group catching Krugman in making statements in his columns.

              1. carry that torch, Gil; carry it high…

                1. Shrike, is that you?

                2. That’s very cute but still has no bearing on the fact that Krugman WAS caught making false claims by that group.

                  1. I just want to get this straight, are you claiming that an ad hominem is not a valid argument?

                3. … and, thus, in summation: DERP!!!

                  Also: Ahhhhhhhhhhhhh — !!!

        3. Well I know one thing for sure he was spinning bullshit about because I saw it myself one time when I was flipping the channels and ran across him on the Bill Maher show.

          He was parroting one of the Democratic memes about raising taxes not hurting the economy by saying we had 90% marginal tax rates in the 1950’s and we had a booming economy then.

          Of course he neglected to mention that nobody was actually paying 90% in taxes then because of all the tax shelters and deductions that existed then but don’t now. It is the effective tax rate taking all those things into account when comparing any two time periods- not the marginal rate.

          Of course there are a great many other differences between the 50’s and now as well that had an affect on the economy, lower levels of government spending, a whole lot less regulation, etc. that Krugman didn’t metion at all either.

      2. Like all that good advice he gave Enron?

    2. WiLLiaM BAnzai!

      Th gift that keeps on giving!

  8. The problem with most libertarians is that they do not believe in incrementalism. Thus, they allow the Hegelian Dialectic to be deployed most effictively against them.

    Tea Party – NAH, fat old ladies who only agree with 80% of me.

    Republicans – Primary ’em – NAH, they are bound not to change.

    Result: beat the meat at home while inflation rages.

    1. Please go die in a fire.

    2. Painting all libertarians with the same brush is analogous to painting all blacks with the same brush. Are you a racist, too?

  9. Why Rasputin?

    1. Crazy person who convinces the rulers that he’s got all the answers. Works for me.

      1. Why Rasputin?

        He has a beard.

    2. Re: Colin,

      Why Rasputin?

      There lived a certain man in Russia long ago
      He was big and strong, in his eyes a flaming glow
      Most people looked at him with terror and with fear
      But to Moscow chicks he was such a lovely dear
      He could preach the bible like a preacher
      Full of ecstacy and fire
      But he also was the kind of teacher
      Women would desire

      Ra Ra Rasputin
      Lover of the Russian queen
      There was a cat that really was gone

      Ra Ra Rasputin
      Russia’s greatest love machine
      It was a shame how he carried on

      He ruled the Russian land and never mind the czar
      But the kasachok he danced really wunderbar
      In all affairs of state he was the man to please
      But he was real great when he had a girl to squeeze
      For the queen he was no wheeler dealer
      Though she’d heard the things he’d done
      She believed he was a holy healer
      Who would heal her son

      But when his drinking and lusting and his hunger
      for power became known to more and more people,
      the demands to do something about this outrageous
      man became louder and louder.

      “This man’s just got to go!” declared his enemies
      But the ladies begged “Don’t you try to do it, please”
      No doubt this Rasputin had lots of hidden charms
      Though he was a brute they just fell into his arms
      Then one night some men of higher standing
      Set a trap, they’re not to blame
      “Come to visit us” they kept demanding
      And he really came

      Ra Ra Rasputin
      Lover of the Russian queen
      They put some poison into his wine
      Ra Ra Rasputin
      Russia’s greatest love machine
      He drank it all and said “I feel fine”

      Ra Ra Rasputin
      Lover of the Russian queen
      They didn’t quit, they wanted his head
      Ra Ra Rasputin
      Russia’s greatest love machine
      And so they shot him till he was dead

      Oh, those Russians…

      1. You really have not lived until you’ve danced a jig with drunken metalheads to Rasputin.

      2. Holy shit. I have no memory of that song.

  10. What’s funny (in the not-in-the-least-bit-amusing sense of the word) is the weeping and wailing over draconian job cuts inflicted on municipal and state employees who should, according to “true” Keynesianism, NEVER HAVE BEEN HIRED IN THE FIRST PLACE.

    Because Keynes never thought it was a good idea to spend every fucking cent in the good times, instead of saving for the inevitable rainy day.

    [I have not yet RTFA; if this has already been covered, sue me.]

    1. exactly

      1. So if Keynesianism never works “outside the lab” why exactly do we keep trying it “outside the lab”? You know… the “outside the lab” part that involves letting politicians spend money like the “Wives of Beverly Hills” when times are good and like a 72 hour “Wives of Beverly Hills” marathon when times are bad?

        1. that’s a good question

          1. Yeah and I’m waiting for Krugabe to enlighten us with a cogent and non self serving answer.

            1. Apropos of nothing in particular: my bedroom walls are plastered, floor to ceiling, with oil paintings of Paul Krugman, nude and astride a unicorn.

              Oh, it’s true.

              1. fuck you, imposter.

                No, I have no painting of Krugman. I’ve only met him once – when I blew him in the men’s room after a speech that he gave – but that was it.

                1. We shall know the Libertarians by the company they keep.

                  These threads light up like Chirstmas with shrieks of “TROLL!!!” whenever somebody harshes on Libertarian orthodoxy. What will they say about these griefers?

                  [crickets chirping]

                  1. Well, that second imposter was quite clever. Nevertheless, you don’t deserve that grief, poyg.

                  2. “I show up, by my own admission, to troll… and then sob like a spanked spaniel puppy, when trolled back.”

                    Boo hoo hoo.

                  3. Wait. Wait. You show up as “peeing on your graves,” and start blubbering when people here tease you, in response?


                    Dude, don’t take this the wrong way… but: you’re a pussy.

    2. Because Keynes never thought it was a good idea to spend every fucking cent in the good times, instead of saving for the inevitable rainy day.

      Shhh… shhhh… this is where Keynes always falls apart for the “Stimulus!11!” set.

  11. Pre-Krugman NYT was better……..-0.00.html

  12. Where’s Cavanaugh been all this time? I was starting to think he’d gone back to his lifeguard job.

  13. There are two chief problems with the Keynesian idea:

    1. Aggregate demand is never allowed to decline. It doesn’t matter if previous levels of demand were due to world record hysteria and shadow banking shenanigans. What matters is that AD can never ever ever decline. So the state has to borrow to fill the AD shortfall. Of course, what isn’t much mentioned (Krugman does mention it occasionally, but not nearly often enough) is that AD can decline and debt can be discharged, and your economy is now closer to balance. Lower AD, but lower debt service.

    2. In Keynesian econ, the amount of debt in society is irrelevant. Every debt is also someone else’s asset, so the total debt is a wash. So no analysis is ever done about who holds the debt and who is paying it back. Oddly enough, when stimulus time comes, we hear endless amounts about savers v. consumers, and how consumers need the stimulus (to prop up AD). But since debt doesn’t matter in K-Town, we never hear about savers v. consumers (or rich v. poor) for debt service. Odd that.

    And oh yeah, Japan.

    1. Krugman says that the debt matters when it’s convenient to him, and doesn’t matter when it isn’t:…..vate-debt/

      Sort of like how the supposed importance of keeping the deficit high doesn’t matter to Krugman if it gets in the way of raising taxes on “the rich.”

      1. Krugman says that the debt matters when it’s convenient to him, and doesn’t matter when it isn’t

        Eh, not exactly. Krugman is saying the total amount of debt doesn’t matter, but that the amount of debt in a particular area can cause problems. I disagree with the former (for reasons I just stated), but he’s not contradicting himself..

        1. All three good points. Questions though…

          Do we have to do enough stimulus so that aggregate demand never decreases?

          I’ve always looked at Keynsisiam as similiar to the lifestyle consumption theory.

          Basically you do a bit of borrowing to smooth out the rough spots. But of course since you have to pay that back, total growth and consumption will probably be about the same.

          I think the bigger problem is that we weren’t just borrowing enough to smooth out the rough spots, but instead borrowing at a level that moved large amounts of future consumption into the present.

          Thus, we’ve moved so much consumption up, we’ve reached a point of diminishing returns, and now are in a large deficit.

          1. + 1.5 Trillion (annually)

    2. Every debt is also someone else’s asset, so the total debt is a wash.

      An accounting convention that ignores the real world where defaults happen, currencies are devalued, etc.

      1. And the psychological impact of debt. It scares the shit out of people.

      2. Jesus, no shit.

        What’s the old saying… if you owe someone $100 bucks, they own you. If you owe someone a million bucks, you own them.

    3. Well there’s also the fact that Keynesian analysis assumes economic actors are complete fools who can’t tell a temporary spike in demand from a sustained increase in business activity.

  14. Tim’s back! Time to dust off the dictionary and limber up my Google-fu.

  15. Keynes won’t die so long as he provides a convenient intellectual framework for statists to advance their other goals.

    Krugman being “right” in his predictions should be tempered with the facts that:
    1. he had to model the bubble popping as an exogenous shock, while Austrian theories of the business cycle predict such problems arising
    2. since we have a sample size of one, we can’t test whether the reasoning was as correct as the prediction, and that’s important when someone tries to dictate policy and be predictive (especially given the similar hit rate of many Austrians).

  16. Thankfully, Tim is providing helpful links. Peterson Field Guide to Birds… Who knew Paulson was such an expert?! Perhaps he can sit in for NPRs next edition of Bird Notes.

  17. Whatever you want to call the American Recovery and Reinvestment Act (ARRA), or TARP

    American Structured Securities Rescue Act for a Prudent Economy.


  18. Keynes problem is this:

    He was proposing a hybrid political/economic theory. On the economic side, maybe it wasn’t so bad.

    On the political side, it was a fucking disaster, because it assumed that politicians would actually raise taxes and/or cut spending in good times. That runs contrary to the political incentives that govern elected politicians. Basing a theory or model on that behavior is fatally flawed.

    1. In fairness, every political economy theory suffers the same problem.

      1. Exactly. The problem is universal and well-known. Keynes managed to ignore it entirely.

        And not just ignore it. He made it worse, by giving them cover for doing the wrong thing.

    2. Not really. Even in the best of conditions you still have to deal with Keynesian factors that are entirely erroneous such as the positive multiplier and the Philips Curve.

      1. I read recently that the original Phillips Curve posited a relationship between wage inflation and employment rather than general inflation and employment. That is, as we go into a job market where we near full employment, there are fewer unemployed workers competing for jobs and so wages increase.

        I don’t have the charts at my fingertips, but IIRC that assertion has been validated by empirical evidence.

        1. Wouldn’t both increase? Simply said, if everyone has dollars in their pockets, then the price of goods would… go up, hence general inflation?

          1. Sure it would.

            Labor costs are one of the largest cost components for most businesses.

            They are going to push that along to the customer as fast as they can.

        2. That interpretation would make the Philips Curve irrelevant because there would have been nothing original about its claim. What you stated goes back several centuries. It is the general theory underlying the Philips Curve that made it worthy of consideration and where it proved to be wrong.

    3. “He was proposing a hybrid political/economic theory”

      The idea that government should be trying to “manage” the economy and “create” jobs is a purely political idea dreamed up in the early 20th century to begin with.

      It certainly isn’t pursuant to any enummerated power delegated to the Federal government in the text of the Constitution.

  19. Keynes, they say, made a lot of money as a currency arbitrageur, an exercise which requires an information advantage.

    I wonder what Keynes would think of a world awash (drowning) in information.

    1. Keynes had the advantage of being a public officer while also being a private trader.

    2. I wonder what Keynes would think of a world awash (drowning) in information.

      I’m sure Keynes would be for Net Neutrality.

  20. c) features the kind of groupthink rarely seen outside a French parochial school.


  21. How does a deal that contains no actual cuts, adds to an existing $14 trillion pile of public debt, and preserves spending for cowboy poetry qualify as an “austerity” budget?




    1. “TEAM RED, TOO!”

    2. Seems like a communication problem to me. How’bout a speech?

  22. Like most readers, I got discouraged by the shrinking page size, the self-confident erroneousness that becomes apparent whenever America’s newspaper of record covers a topic I’m familiar with, and the lack of a comics page

    That’s whatever page Krugnuts’ column appears on.

  23. (1) After reading the Making of Modern Economics I’m pretty convinced Keynes will never die. We’re gonna go in cycles — maybe towards the Austrians if the tea party gets their way, then eventually to Marxism, and back again.

    (2) Someone told me that world war II got us out of the depression because we spent a lot more money, more than during the great depression. The implication is that if FDR spent even more — as much as during the war — then we would have emerged from the great depression sooner. Anyone have any responses?

    1. Keynsianism won’t die because, as stated above, politicians are drawn to it because Keynes’s ideas give policy-makers cover for their actions.

      1. It’s also a non-falsifiable hypothesis. If high deficit spending is tried and fails to yield an economic recovery, the Keynesians can always answer that the spending needed to be even higher.

        1. Krugman was all over that early and often.

          During the first weeks of TARP and the Stimulus, Krugman was on NPR daily grousing about how small all the packages were when our economy could easily absorb much higher debts and spending.

          1. To (begrudgingly) give Krugman some credit, he *did* do a lot better on some of the macro forecasts than most of the hyperinflation-and-bond-market-collapse-any-day-now Austrians. I don’t think that has anything to do with a particular strength of Keynesian theory though … Mish made all the same predictions and called the gold market better besides.

          2. Krugman was on NPR daily grousing about how small all the packages were ……

            Didn’t know Krugnuts swung that way!?

    2. I do, I do! It’s all in my book, Depression, War and Cold War.

    3. Unemployment went down in WW2 because a whole bunch of people got taken out of the private sector by being drafted into the military.

      It wasn’t any vindication of Keynesean economics.

      1. Also, the American economy boomed immediately after WW2 because we were the only major nation whose industrial infrastructure hadn’t been pretty well annihilated by five years of war.

        1. Yeah – despite the fact that our own government drastically cut spending right after the war and the Keynseans at the time predicted it would cause another economic downturn. They were wrong again.

        2. Not to mention the fact that we had a 25% savings rate throughout the war.

  24. For the record actor James “Jimmy” Stewart passed away in 1997 James B. Stewart is a Pulitzer Prize winning reporter formerly for the Wall Street Journal. jimmy stewart was a lifelong Republican who supported both Keynesian Richard Nixon and the more monetarist Ronald Reagan.

  25. I would think a bullet to the head should suffice.

  26. Keynes died all the time and keep resurrecting every time. Politics never goes wrong. If it’s going bad, arguments come out as “it will be worst if we hadn’t do it.”

  27. Keynes doesn’t work for the same reason communism doesn’t work; they both depend on the hopes that the impossible (or the outlier) will happen.
    Keynes needs a government that will exercise fiscal responsibility. That only happens when a government is deadlocked over partisan bickering or some procedural concerns (see: Clinton).
    Communism requires the ‘new soviet man’ who acts contrary to his own self interest. That only happens when a gun is held to his head.

    1. the left believes the problem with these interventions is the market, not the government. If they ever gave up on Keynes it would be in favor of more pure socialism.

      1. It might be an actual belief; not sure.
        A more cynical view is that the supposed ‘belief’ is nothing other than confirmation bias which supports the ‘belief’ in central planning.
        If you think you’re smarter than everyone else and can plan their lives better than they can, well…..
        I’m going with the cynical view.

    2. In other words, total disregard for human nature.

  28. So, Supply-Side Economics causes the greatest financial catastrophe since The Great Depression.

    One, EXTREMELY diluted Keynsian(ish) program stops the bleeding and starts a moderate, if delicate, recovery. Then, every attempt to employ more Keynsian Programs to solidify and bolster said recovery is thwarted by Republicans. Yet Keynsian theory is dead.

    Very, very interesting way to look at it. And by “interesting,” of course, I mean “dishonest.”

    1. “EXTREMELY diluted”, you mean the biggest government intervention in history is still too diluted. Japan has tried the Keynesian tonic for a long time now, and they still waiting for their recovery, all they have to show for it is 200% debt ratio.

    2. I would ask for some of what you are smoking but I see that one of the side effects is a bout of extreme paranoia, so no thanks.

    3. “So, Supply-Side Economics causes the greatest financial catastrophe since The Great Depression.”

      And, no Krugman or Reich isn’t a credible cite.

    4. So, Supply-Side Economics causes the greatest financial catastrophe since The Great Depression.

      Government, using Fanny and Freddy, dumping 6 trillion dollars through loans, loan purchases and loan guarantees in an effort to manipulate the market to increase home ownership is “supply side economics”?

      Looks to me more like Keynesian style economics then a free market.

      perhaps it is “supply side economics” who gives a shit. the government using heavy handed tactics caused the financial crisis trying to manipulate the housing market and then after the mess spilled onto the entire economy the government again tried to fix it using heavy handed tactics and not only failed spectacularly but left us 4+ trillion dollars more in debt and a double dip recession.

      how about we simply get the government and it heavy handed tinkering of the economy out of the fucking equation?

  29. Aggregate demand should just stay on a slow, steady growth path.
    Generally, it should be 3% more this year than it was last year. If it has grown more quickly or slowly, it should reverse.

    Perhaps this seems like a central group telling everyone what they should do, but I see it as creating an environment or background, that is the least bad option for people to make the myriad of particular adjustments necessary for coordination and dynamic change.

    1. “Perhaps this seems like a central group telling everyone what they should do, but I see it as creating an environment or background, that is the least bad option for people to make the myriad of particular adjustments necessary for coordination and dynamic change.”

      What does that translate to in English?

      1. Translation:
        Your betters are in charge, they will fix things.

  30. challenged by a third-world Internet connection

    Beirut Daily Star

    Quit screwing with us already and tell us where the hell are you, where the hell have been and when the hell you will be back???

  31. I would ask for some of what you are smoking but I see that one of the side effects is a bout of extreme paranoia, so no thanks.
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  32. It’s a known fact that dead fish come back to life for the sole purpose of crying tears of blood when wrapped in the NYT.

  33. Keynesianism is valid, however the problem is it only involves trading off growth later for growth now

    or it just may not work period, the great depression lingered on for a very long time, and this current recession seems to be lingering and I suspect will continue to linger for a long time

    then again it is also possible that worse stuff could have happened without the spending, especially with our current recession and the bankruptcy that the big banks and automakers were facing

  34. Given that when Keynesian policy was practiced during the Great Depression, it worked swimmingly (real economic growth from 1933 to 1937 actually outpaced growth in the boom years of the 20s), I would say that it is most definitely valid. 1937 saw a huge decrease in government spending and a monetary contraction by the fed, however, which resulted in another depression.

    1. First of all, unemployment during the false boom of ’33 to ’37 barely budged from its mid-Depression highs of around 15%, so claiming those years were a triumph for anything Keynes-related is a bit of a stretch.

      Second, Keynesian spending artificially propped up GDP by pulling future demand into the present. That in and of itself isn’t a bad thing, particularly if that level of output can be more or less maintained when the stimulus is withdrawn. But, sooner or later, any stimulus has to end. If the result is an inevitable return to the depressed pre-Keynesian level (except now with substantially more crushing public debt to pay off), be it in 1937 or 2011…well, once again, I’m having a really hard time understanding how this can be considered *supportive* of the theory.

  35. All these pro-Keynes commentators miss the forest for the trees. The economy’s growth is solely to due an increase in productivity and population. Most people forget that in the GDP calculation, the I is never taking into account for every dollar spent comes from somewhere else. Governments can create money,but not wealth thus the 97% fall in the dollars value since 1914. Also Herbert Hoover boosted government spending by 50% in real terms and 1929-1933 went so well. What people miss about the 30’s is that the federal government was such a small part of our GDP

  36. What have we learned in 2,066 years:

    “The budget should be balanced, the Treasury should be refilled,
    Public debt should be reduced,
    The arrogance of officialdom should be
    Tempered and controlled,
    And the assistance to foreign lands should
    Be curtailed lest Rome become bankrupt.
    People must again learn to
    Work, instead of living on public assistance.”
    Cicero – 55 BC

    So, evidently nothing…

    1. What have we learned in 2,066 years:

      One thing we’ve learned is to be careful of your sources.

  37. As long as there’s a “liberal” State-humper looking for some smart-sounding justification for his State-humping, I’ll be there.

    By the way, Obama’s mentor Uncle Frank the Red sends greetings from Commie Hell and wants me to tell young Barry: “Great job, kid. But don’t get cocky. Now blow this economy to back to the Stone Age and get outta there!”

    1. “Obama’s mentor Uncle Frank the Red”

      More like “Obama’s real father, Frank the Red”

      Look up pictures of Frank Marshall Davis and Obama Sr. Which one looks more like Mr. President?

  38. I am a little confused by the argument. Krugman is accused of not using evidence but the author here assumes any time the government spends money it is following the Keynesian model. That is how he justifies the TARP program as Keynesian. To my knowledge Krugman does not say that TARP is a Keynesian project. Krugman has been, on the other hand, critical of Obama’s stimulus project because very little of the money actually was directed toward folks who would spend it and thus, increase demand in the economy. Sure, some may have declared TARP a jobs program but that does not make it Keynesian. By that logic any policy decision would be considered Keynsian which is just stupid.

    I am not an economist but I am intelligent enough to see that Krugman’s blog is loaded with data supporting Keynes like theories. Tim can dispute them but to claim Krugman is not backing up his arguments speaks to his (Tim’s that is) intellectual laziness.

    1. I suggest you actually read Tim’s article again, as he is careful to say that all spending is not Keynesian, etc, and notes that few actually understand Keynes and how it applies to our current situation.

      Noting that Krugman notes various data is naive. Krugman did in fact study economics and has the ability like anyone else who has done so to use statistics and data willy-nilly to support whatever argument he is making. He is a disgrace to honest and thoughtful economists.

  39. As long as there’s a “liberal” State-humper looking for some smart-sounding justification for his State-humping, I’ll be there.
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  40. You guys are half bright. I’ll give you that. But emphasis on half. If one of you has read a Keynes book, or a Friedman book, to completion I’d be mega surprised. Your comments … bah. What’s the point.

    1. “If one of you has read a Keynes book, or a Friedman book, to completion I’d be mega surprised.”

      Wonderful “argument”!
      Translated from quarter-bright:
      “You have to read *all* of my bullshit or you can’t disagree.”
      Sorry, willie, logic fail.

    2. Wille… Conventional liberal tripe. Demeaning people as half-bright? Now, using terms like “mega-surprised”… Now, that’s really full-bright stuff…

      1. Since when is Friedman liberal? I think my point is made. We don’t see eye to eye on my original observation; so be it. But you only strengthened my point.


  41. Mr. Cavanaugh,
    You began the fifth paragraph with this:

    “In a business column, It’s a Wonderful Life star James Stewart compares 2011 with 1938,”

    Really? Jimmy Stewart the actor died in 1997. Such sloppiness ruins the entire article and your credibility.

    1. Eric,
      Your sloppiness ruins your comment.
      The *column* he links makes that comparison.

      1. …but the column wasn’t written by THAT Jimmy Stewart….

    2. Lighten up, Francis. And turn your sarcasm detector up while you’re at it.

      You, too, Seeza.

  42. You criticize the NY Times for being intellectually lazy and narrow minded. Yet you provide now substantiation for your own positions, which you don’t really bother to define. You just needlessly put quotes around a few words and phrases and pretend that you’ve given a reasonable account of the NY Times perspective. Your article is drivel. Reason needs to hire some writers who actually bother to make a decent argument to back up their arrogantly stated assertions. You have become the unthinking unquestioning mindless drones that you pretend to critique. But you lack the intellectual rigor to do it in any convincing fashion.

    1. pardon me, but the NYT provides endless practical examples of it’s own feckless gamesmanship. your comment is drivel. examples of poor journalistic standard, scandals of forgery, hyper-partisan activism on the part of the paper, they are numerous and easy to find. this article is not a reference text for that which you refuse to admit, in your liberal arrogance. it is a statement of truth, for which is there is ample evidence in the world at large.

      1. Seriously? Your argument is that reason doesn’t need to provide facts or reasoned argument because, in your estimation, NY Times is liberal propaganda and Cavanaugh’s assertions are clearly true and require no evidence. So, basically, you believe your right and feel no need to hear any evidence for or against an argument? And you call me a liberal because I made a critique of reason that might be construed as a defense of NY Times. Again, you feel no need for any evidence to support your argument. What is wrong with thinking people need evidence to support their assertions? Why do you get so upset when someone tries to hold reason to a high standard? Do you not want it to reach a high standard?

        1. Woops, that was supposed to be “you believe you’re right”. But I don’t think my typo should change the argument.

          1. Mikey… The Times wrote a front page story on Issa that said he was worth billions and in fact its millions. They said he profited on a real estate investment that was helped by road funds that had not yet been spent. They said he invested in a fund and made a 1900% profit, when in fact he lost money. These are all facts that the Times twisted and mis-stated in order to attack the GOP Congressman causing the progressives fits.

            That is a simple factual recent example of the partisan political hacks that write for the Times. Does that work for you?

            Oh, and Mikey, spelling and grammar only count at the Times. Elsewhere, it is the intellectual content that matters. Not the form.

    2. Shorter Mike M. – “LEAVE THE NEW YORK TIMES ALONE!!”

  43. anyone that considers the NYT the “paper of record” is either old, naive, or a hyper partisan acolyte of progressive “thinking.” here on the ground, it is quite obvious that Keynes fails in 2011, and not because the effort was too small (you’ll hear that nonsense from the discredited liberal liar and inflamer Paul Krugman). In fact, taxing/spending/printing does not work in this world. if it ever did, and that is questionable, those days are long gone. The NYT is a partisan tool of the media/political/entertainment progressive elite. I wouldn’t clean up after my dog with it….

  44. the NYT does not need a comics page

    1. You can say that again.

  45. the NYT does not need a comics page

    1. You can say that again

    2. You can say that again.

  46. Thank you! Thank you!
    May your un-eulogy of Keynesian economics be forever heard, printed, or otherwise distributed.
    Hopefully, now no one will continue to dig up the corpse!

  47. I whole-heartedly concur with the author. The Times has become a bit of a bete noir for me. I force myself to read Krugman, but require medication shortly thereafter. Reading the comments is even more upsetting as the fawning few remaining Times readers say “thank you, Doctor Krugman, for explaining this and that to me and we should kill or imprison all conservatives”.

    I take heart in going to Yahoo and reading what the masses are saying and while vulgar and far more poorly written than the comments in the Times, the essential sensibility reflected there gives comfort.

    The Times should not be able to survive another decade financially on its present course. People asked me to finance a few of their printing plants and no one would touch them. They are still bleeding cash, if not any genuine reportage. Perhaps they will ultimately do the right thing and just go away?

  48. a trip down memory lane…

    the 2008 nyt endorsement of brack obama.

    well worth the laughs. can’t imagine the yarn they will spin when they endorse him, ‘officially’, for 2012.…..4fri1.html

  49. The James Stewart who starred in “It’s a Wonderful Life” has been dead for 14 years.

  50. Keyesianism will never truly die.
    No matter how utterly and completely it fails in reality (and theory) it always has the built in excuse, ‘we just didnt spend enough’.
    Keyensianism is the last refuge of (almost) all politicians – right and left. It’s justifies their existance as the wise central planners, correcting the wicked ‘business cycle’ on behalf the little people.

  51. When the NYTimes is convulsing in its financial death throws (within 5 years), George Soros will offer them a couple billion dollar bailout on the condition that they stop being so damn “right-wing” and agree to feature the Huffington Post on the front page.

  52. Jimmy Stewart aka James Stewart of “It’s a Wonderful Life” fame has been dead for more than a decade. Was this some kind of joke that my small brain was unable to comprehend or just bad reporting?

  53. This post is really nice. And also it is full of informative, really like it very much.

  54. Facts mean nothing to liberals. They truly believe that if they say something long enough and all agree on it, it is reality. Quite scary, but this is what we are dealing with. Only THEY don’t realize that the majority of Americans see the truth. That’s what the midterms were about and what the complete destruction of the Dems at the polls next year will prove, again.

  55. Quite a lively debate. The argument for or against government spending to abate unemployment hasn’t produced the intended results.

    The most persuasive number is the percent of GDP consumed by government spending: below 20% the economy has generally done well and unemployment has been low; above 20% has led to poorer economic productivity and higher unemployment.

    Of course, the Sen. Dodd / Rep. Frank housing debacle was a different matter. Check out the September 11, 2003 NYT which contains an article on a Bush proposal to check the growing risks of Fannie and Freddie, which was summarily criticized by the left as unnecessary.

    The rest, of course, is history.

  56. I’ve come to the conclusion that Keynes wrote “The General Theory” with a gov’t bureaucrat’s gun to his head. Washington was so pathetically inept at using government to get us out of the recession, I think they needed a highly respected economist to crazy-glue together an inkblot of economic nonsense to justify deficits as the cure-all to unemployment.
    Every Keynes book was clear, concise and easy to understand except for General Theory. I think the only people who believe this book is solid economic theory are Paul Krugman and EJ Dionne. Keynes, govt officials and economists know the book was just a legitimizer of throwing the kitchen sink of government intervention at an economy virtually destroyed by past govt programs. Keynes is probably rolling over in his grave listening to Bernanke and Krugman spew this ad-hoc-ery econo-trype day after day……..

  57. Always amazed with the simple-minded approach whereas something has to be all right or all wrong. Since we don’t care for a line or two we reject the whole book. Thus we reject Keynes. Since we can take a line or two and pimp it to meet our right wing fantasies we accept the whole book. Thus we accept Friedman. Keynes is like anybody else; he was right and he was wrong but he gave us a lot of thinking tools that we didn’t have before. BUT the little minds reject all of his work because it’s “his” work, not because it’s all wrong.

    There should be a place for stupid people – oh wait! there is! Texas and the radical right movement dressed up in a libertarian nightie.

  58. Facts mean nothing to conservatives. They truly believe that if they say something long enough and all agree on it, it is reality. Quite scary, but it works. That’s what the midterms were about and why the Dems will probably lose next year, too. Here is the truth: 30 years of Friedmanism brought us to the brink of financial collapse. A half-hearted attempt at Keynesian economics broke our fall. Too bad our voters are under the Faux News spell. Conservative/libertarian economics is a failed hypothesis, but some people never learn.

  59. The false assumption of the Keynesian model is that ANY and ALL spending by the central govt is essentially the same and does the same thing and has the same effect that an equal amount of spending by the private sector would.
    That is Keyne’s huge mistake. All spending is not alike nor beneficial for the economy. Spending to produce goods or services unwanted by the public will not create any permanent jobs, since once the govt spending is withdrawn those jobs are unwanted/unneeded by society. Permanent jobs only get created when the pubic demands something that leads to their creation. Paul Krugman is practically
    braindead with respect to spending in
    any economic system. And so was Keynes, his mentor. Their system was, as we can now see, grossly inaccurate in its assumptions. It’s almost always those bad assumptions that kill you.

  60. I just need to say thanks for sharing.

  61. I am very enjoyed for this article. Its an informative topic.


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