Why Are Keynesians of All People Calling for Tax Increases in a Crap Economy?


If there's one area of human activity that is more fully soaked in politics than politics, it's economics.

Over at National Review, Mercatus Center economist and Reason columnist Veronique de Rugy points to the latest instance of the triumph of ideology over intellectual consistency. President Obama, along with most congressional Democrats and liberal pundits (including Nobel Prize winner Paul Krugman) are calling for increasing taxes on Americans making over $200,000 a year. They do this in the name of Baron Keynes.


the standard Keynesian theory recommends against raising taxes during [an] economic downturn since it will hurt economic growth and, as such, makes it even harder to get debt burdens under control….

Given the weak economy, where are the outraged Keynesians complaining about the unsoundness of raising taxes in this situation? I know there are plenty of them asking for more spending. If you remember, I asked that same question during the European austerity debate, when many pundits…were complaining about European governments' mostly-pretend spending cuts while never mentioning the large increase in taxes that took place in these countries….

Whether one thinks that tax rates should higher or lower in the long run, right now isn't the time to increase them.

More here.

The short answer to why neo-Keynseians are in favor of tax increases now is because they are first and foremost political creatures.

Back in 2010, everyone agreed that if all the Bush rates expired, the feds would haul in about $3.9 trillion over a 10-year period. If only the rates on the $200,000-plus crowd expired, the extra amount would be around $700 billion over the decade, or around $70 billion a year. That's a lot of money to everyone but the federal government, which spends close to $4 trillion a year. Simply put, the push to change tax rates on the wealthy isn't about revenue, or about getting the government on anything approaching sound fiscal footing.

Rather, it's largely a symbolic gesture that is political in nature and effect. That it goes against basic Keynesian theory yet is espoused by neo-Keynesians tells us more about them than it does about good ol' J.M. Keynes.

That said, it's time for the limited-government crowd to get its act together. The time for simply saying the answer to every problem is to reduce rates is at best half-right. The GOP—and many conservatives and libertarians—for too long refused to focus on the spending part of the equation. More than Democrats, the Republicans sanctified deficit spending, to the point that under Bush spending rose far faster than revenues did. And you just didn't hear enough folks on the right complaining, because it was politically expedient for them not to. Libertarians were the ones playing Cassandra. And while liberals and conservatives like to blame libertarians for all the ills of the planet, they are the ones responsible for a federal government that is not simply an embarrassment of debt but a real impediment to economic growth.

Back in 2011, I interviewed David Stockman, the former congressman who served as Ronald Reagan's first budget director. Stockman made the mistake of taking good old Dutch at his word—that Reagan really wanted to cut the size and scope of government. Stockman helped make the case for certain tax cuts and program snips but then got in trouble when he persisted in pushing to cut what he considered useless spending by what he stills calls the "welfare-warfare state" (hey, he'd been in Michigan State's Students for a Democratic Society).

Stockman told me that he thinks we should have far smaller government than we do. He earned Reagan's ire for pointing out the defense spending was particularly prone to egregious overruns and wastefulness because nobody wants to be seen as weak on military spending. But Stockman says that if we're going to insist on getting more government than we're willing to pay for—if we're going to borrow 40 cents of every dollar the feds spend—than it's the moral thing to do to raise taxes to pay for it. It's just not right to push the tab on our kids and grandkids. And chew on this: If we actually had to pay for the government we are getting, we'd probably start thinking very quickly of ways to cut it. Because we know we're not getting what we pay for, even at a 40 percent discount.

That's a political calculation too, I suppose, but it's not a b.s. symbolic one like the one peddled by today's Keynesians.

Read the Stockman interview here. And watch by clicking below.

NEXT: More Evidence of Human Interspecies Hanky Panky

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  1. Raise taxes, spend more, increase GDP. It’s simple.

    1. Why, we can just raise taxes to 100%! That’ll solve all of our economic problems.

      1. Well sure, the tax part is mostly irrelevant. As long as we raise spending GDP will go up.

        But we need to stick it to those wreckers and kulaks.

        1. If the tax part is mostly irrelevant, then we can cut tax rates in half, or even more.

          1. And let the kulak hoarders keep more of their wealth?!?

            You’ll never make it through the revolution!

            1. I sympathized with the Whites even as a kid.

            2. I think you meant to say: “And give the kulak hoarders more of the Government’s wealth?!?”

              1. Adam is so correct, except, I may quibble. How about society’s wealth? Government is icky, what we have is a branding problem.

        2. No a credit card is not valid income.

          No you can’t keep spending because we’ll end up like the Euro-zone.

          Keynesians don’t understand the broken window fallacy.

          1. oh, they understand it; they just don’t give a damn. However, they count on a large portion of the populace to not understand it.

          2. Keynesianism at this point is simply a convenient “philosophy” to hide behind, I think. It’s not about what works.

            This puts one in the odd position of having to defend Keynes. Whatever the merits of his theories, he didn’t prescribe THIS stuff.

            It’s like, if some group was going around putting babies through wood chippers and saying that they are simply practitioners of Pat Robertson’s methods and philosophy.

            On the one hand, Pat Robertson is a strong contender for the Biggest Douche in the Universe. But on the other hand, he never has told people to go out and throw babies into wood chippers.

            1. Sort of like ‘social justice’?

              1. No, that’s more Orwellian. Trying to figure out whether it’s Newspeak or Doublethink.

        3. benji|7.27.12 @ 12:49PM|#

          Well sure, the tax part is mostly irrelevant. As long as we raise spending GDP will go up

          “GDP (Y) is a sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X ? M)”

          Given raising taxes negatively impacts parts 1 and 2, ‘raising spending’ is by no means a guaranteed source of GDP ‘growth’, particularly since the majority of destinations of government spending are not in growth or productivity-improvement areas.

          I assume you’re kidding anyway. what with the ‘wreckers’.

          1. You push G high enough who gives a fuck about C or I?

            LOOK AT THAT GROWTH!

            1. That’s in the next 5 year plan.

              1. Report to GOSPLAN – you have revealed State Secret. To the gulag!

            2. you actually kind of fooled me for a minute. I’ve heard people sincerely say similar things

              1. I’ve heard PhD’s say these things.

                1. In what should be relevant fields, not just any PhD.

                  1. Right. “Economists.”

                2. I’ve heard famous newspaper columnists say these things.

          2. I assume you’re kidding anyway. what with the ‘wreckers’.


            Benji got me with his spoof below.

            Screw you benji!!…

            …and well played.

    2. Why doesn’t greece spend their way out of a recession?

      You can’t raise taxes because you’ll get less revenue out of them, btw.

      The government is incompetent in everything it does.

  2. Why Are Keynesians of All People Calling for Tax Increases in a Crap Economy?

    Because they are clueless idiots. Also Fiarness! or something similar that is a disguise for equality of outcomes.

  3. Fuck the income tax. Gov’t has no lawful right to the fruits of our labor. The Constitution says so, and early Supreme Courts struck down attempts at taxing income. The day will come, maybe after hyperinflation kicks in, when most if not all Americans simply refuse to pay. BTW, all checks written to the IRS are cashed by a Federal Reserve Bank, so in effect, our income taxes are only collected to pay the private Federal Reserve. Is that enough to piss you off?

    1. BTW, all checks written to the IRS are cashed by a Federal Reserve Bank

      [citation required]

      Look our fer black helicopterz!

      1. If you’ve ever written a check to the IRS, your cancelled check is your citation. I’m trying to find an example on the web now.

        Regarding black helicopters, ever wonder why we have a Federal Bureau of Investigation and not a Federal Bureau of Police? Fucking jurisdiction, how does it work?

    2. A more likely end game is that people won’t care if they have to pay, because they won’t be using worthless currency for exchange, anyway (because nobody will accept it as payment). I don’t think this would be a good thing, but it’s what history shows to be the end point of the current trajectory. It’s the trajectory we need to change.

    3. check the 16th Amendment and for the record the Federal Reserve System is not private…

  4. Why Are Keynesians of All People Calling for Tax Increases in a Crap Economy?

    Because Keynesians are not real economists, you silly goose!

    1. Sure they are. The simple fact that they come to conclusions you do not agree with does not mean they are not economists.

      1. Keynesians are not economists. They’re government shills.

        1. Those aren’t mutually exclusive. Paul Krugman is, like it or not, an economist.

          This No True Scotsman thing is a buncha bullshit.

          1. Krugnuts was an economist. Past tense.
            At some point he found he could make more money working for the New York Times as a government shill pretending to be an economist.

            1. Krugnuts was an economist

              Thank you! Krugnuts is like the nerdy dweeb wants to hang out with the cool kids and thinks he will get to once he tells them he can break into the school computer and change their grades!

              Really…this silly ass has been campaigning for a government appointment for years!

            2. Yes, I tend to agree. He’s the one who chose to convert his credentials into a mere veneer for his politics, not the rest of the world.

              If a physicist started spouting Young-Earth Creationism, whether he had achieved great success previously as a physicist would have no bearing on his present credibility.

              1. Wait a minute….you’re denying “Young Earth Creationism”?

                DIE HERETIC!!!

              2. This^ There is no more reason to call someone who ignores the laws derived from the existence of scarcity an economist than a young earther a geologist. It is at the very root meaning of the word.

            3. Krugnuts was an economist. Past tense.

              Which is why even the people in Europe who ought to be at least somewhat sympathetic to his viewpoint don’t take him even a little seriously.

              A fact which he furiously complains about over and over and over again with his “why won’t these idiots listen to me” whinefest.

            4. Krugnuts was an economist. Past tense.

              As my thesis adviser told me in 2003, “Paul Krugman stopped being a serious economist the day he got his column in the Times.” He really did some great work before Bush v. Gore turned him into a gibbering shill, though.

        2. And have been since day one. Keynes was always about giving the statists a veneer of respectability. How any intelligent person could believe that the state would cut spending when times were good (as his theory posited) just defies belief.

          1. This still does not unmake him as an economist.

            1. I think the fact that he confused marginal productivity with actual productivity in one of the critical chapters on wage rates in economic downturns (the confusion is central to his argument and thus fatally undermines it) makes him at best a terrible economist.

              Calling Keynes an economist is like calling Terry Nazon an astronomer.

            2. Point taken. He was a government shill who prostituted his status as an economist. Happy now?

            3. How is that?

              What are the criteria for being an economist? To have studied it in school?

              Is being an economist something like joining a frat, where you are forever a Rho Alpha Tau or something?

              1. Staying at a Holiday Express Express last night?

      2. Re: Randian,

        Sure they are. The simple fact that they come to conclusions you do not agree with does not mean they are not economists.

        No, they’re not. The simple fact that their conclusions do not reflect reality means they’re not economists, regardless of how much you agree with them.

        1. I’d say that makes them bad economists if anything (assuming that they are economists. I suppose it is true that most Keynesians are not economists, but neither are most Hayekians. Or most people in general, thankfully.).

        2. I don’t agree with them, you screaming retard.

          Are you saying that being wrong precludes someone from being labelled properly?

          I guess Isaac Newton wasn’t a scientist. And Immanuel Kant wasn’t a philosopher.

    2. “Politics” is the nice way to say “class warfare” apparently.

  5. No matter what the situation is, they call for more government and more taxation. More spending, more deficits. More, more, more. It’s like they’re Andrea True fans.

  6. The problem here is, like Communists, there aren’t any real Keynesians.
    Communism was supposed to be about the end of the state. Problem was, it took the new Soviet man to do so, and since the stock were all human instead, the result was the opposite.
    Keynes is all about the state building a surplus in good times, they using that to feed in money in bad times. Problem is, it takes governments to run those surpluses, and since all the governments are run by politicos, the result is the opposite.

    1. Keynesians can never run a surplus even if they tried to balance budgets.

      You can only get a surplus in a truly free economy.

      1. By surplus I mean a gigantic allocation of efficiency, not just any lil ol’ surplus like in the Clinton era. 😉

        1. Good correction. A truly free economy would seem highly unlikely to fill the government’s coffers with a bunch of extra money, taken from the fruits of free citizens’ labors.

  7. I live in NJ where a $250k family income is the middle of the middle class. Why don’t my dipshit Senators recognize they are screwing their constituents?

    1. Because they’ll vote for them anyway as long as they’re Democrats?

    2. Perhaps because their constituents are the bankers and the government, not the proles.

      1. In NJ their constituents are also the pubsec unions and entitlement recipients voting for more ‘gimmedats’.

      2. WTF|7.27.12 @ 12:56PM|#
        “In NJ their constituents are also the pubsec unions and entitlement recipients voting for more ‘gimmedats’.”

        Ditto CA.
        The Euro-Cool train is an union hiring-hall on wheels.

    3. I realize CoL is higher in NJ than most places, but $250k isn’t middle of middle class by any definition.

  8. The GOP – and many conservatives and libertarians – for too long refused to focus on the spending part of the equation.


    1. They mean Bill Maher.

      1. Bill Maher renounced that statement a long time ago and said he no longer considers himself libertarian.

    2. Have we ever not been concerned about the spending, scope, and size of government? Ever?

      1. Many libertarians have socialist tendencies. It is a valid criticism.

        1. I just don’t see how libertarianism–an anti-state creed–jibes with socialism, a pro-state creed.

          1. Same here, Pro. Without getting into NTS territory, I don’t really see how libertarians can really have much in the way of socialist tendencies.

            Like fascism, the left-libertarian alliance is always descending on America, but never quite lands. And for good reason.

            1. Any socialist can be libertarian – all he needs to do is eschew aggressive violence in socializing stuff. I like to cite the Hutterite’s as an example of this phenomenon.

              The reason why the libertarian socialist is about as rare as the libertarian white-supremacist is because the vast majority of them don’t think they can persuade people to live the way they want, so they reach for the sword.

              1. I think the Huuterites are not a good example. Commutarianism isn’t socialism. The difference is the voluntary nature. Socialism has to be coerced for it to work at all.

                It’s an important distinction. Socialists like to spout or claim commutarian principles, but truly communal living is voluntary.

                Libertarian socialist is an oxymoron at its core. Libertarian communalist is is perfectly valid as a concept. I imagine many examples would spring up in Libertopia.

                1. Yes,I was thinking the same thing. A voluntary communal existence is perfectly consistent with libertarian political thinking, which allows all sorts of noncompulsory associations.

              2. Ah, there we go.

                To me, socialism is a project that cannot exist without the state.

                Voluntary communal sharing, sure, that can be libertarian as hell. But that’s not what socialism means to me.

                The voluntary-communal-sharing libertarians need to get a new label, if they feel the need to be distinguished from the red-in-tooth-and-claw market libertarians.

                1. Do communialists refer to themselves as socialists? I don’t see how anyone would, unless they really were. Socialism has strong overtones. To such an extent that American socialists rarely will call themselves that.

                  1. It all depends on how you define socialism, I guess.

                    I think that there are two strains:

                    Voluntary socialism and coersive socialism.

                    Practically speaking, the former are very rare, and the latter is pretty much what 99.9% of socialists are envisaging.

                    The former can exist in a libertarian legal order, the latter can’t.

      2. Have we ever not been concerned about the spending, scope, and size of government? Ever?

        Under Coolidge I was pretty ok with those things.

    3. Really?

      Well yes. libertarian who control at least 8 of the 10 branches of government refuse to raise military spending.

  9. Tax hikes are called for specifically in response to the deficit problem. Yes politics is involved–making Republicans defend tax cuts on the wealthy even when their major concern is deficits.

    Yes, deficits should not be the primary concern in an economy that is growing too weakly.

    Tune in for the next episode of Libertarians Pretend to be Incredulous.

    1. There is no evidence that the tax rate increases would go towards ameliorative efforts concerning the deficit.

      1. Remember when the money paid back to TARP went to pay down the debt, as promised?

        Me neither.

        1. How telling that you also forget the stimulus was a one-time boost in spending.

          So many GOP hacks around here.

          1. One-time? Let’s check the budgets, er… Are you sure it isn’t the baseline of Harry Reid’s continuing resolutions? You may want to fact check you statement.

          2. So many GOP hacks around here.


            RC mentioned TARP which was signed by Bush…

            How does criticizing Bush make one a GOP hack?

            1. I think Benji was being sarcastic.

              1. I think Benji was being sarcastic.

                Yeah he got me.

                I figured it out after reading up thread.

            2. Check the AM links, Elim called people GOP hacks randomly. I liked it as an ending.

        2. Remember when the money paid back to TARP went to pay down the debt, as promised?

          It did! Of course, then they borrowed it right back.

      2. “There is no evidence that the tax rate increases would go towards ameliorative efforts concerning the deficit.”

        Oh, but Randian, THIS TIME, it will be different!!!

    2. I thought your wordview allowed that deficits didn’t matter?

      Hey! You and Dick Cheney can find common ground!

    3. T o n y|7.27.12 @ 12:50PM|#
      “Tax hikes are called for specifically in response to the deficit problem.”

      Yes, shithead, I’m sure you can cite some graphs showing the deficit reducing for every tax increase.

      1. Unfortunately for Tony, any graph he would produce would still show a trillion dollar plus deficit.

        1. Also unfortunately for Tony every tax cut since FDR has shown an increase in revenues.

          1. some folks might call that a correlation, but like Krugs, I’m no economist.

            1. wareagle|7.27.12 @ 1:40PM|#
              “some folks might call that a correlation, but like Krugs, I’m no economist.”

              Not sure it matters, but shithead has yet to show even a correlation for tax hikes and reduced deficits.

              1. Being an “economist” means never having to show correlations!

    4. Re: Tony,

      Tax hikes are called for specifically in response to the deficit problem.

      “Honey, my requests for your third job search are specifically in response to my deficit spending. Don’t you see?”

      “But, honeybunch, dear, wouldn’t it be much simpler – and less tiresome for me – if you just reduced your spending to levels we can afford now?”

      “But, dear, don’t you understand? MY spending is not under my control! I *have* to spend. Tony told me so!”

    5. Tax hikes are called for specifically in response to the deficit problem.

      CBO says the tax hike on the rich that democrats in congress and Obama wants would only give us 50 billion more a year.

      How do you propose to pay for the other 1200 billion of our yearly deficit spending?

      1. Reduce military spending and increase the medicare tax to cover the $400 billion a year increase in Rx benefits that the Republicans enacted without providing funding for…

    6. “Tax hikes are called for specifically in response to the deficit problem. ”

      No? If the government can’t get more revenue, it will increase spending and create a deficit. If the government gets a lot more revenue, it will increase spending even more and create the same deficit.

      If someone is deep in the hole with a loan shark because of a crack problem, you giving them more money isn’t going to help save their kneecaps, it’s just going to buy them more crack.

    7. Bullshit. For you–and your god-king Barack–it’s all about punishing the wealthy for the crime of being wealthy.

      Even you can do the math; the proposed tax hikes will put a very tiny dent in the deficit at best–assuming that the hikes actually raise revenue (uncertain at best) and assuming that you guys don’t spend it on some “vital” new program (keep dreaming!).

      No, this is all about creating your perfect egalitarian world where wealth is “redistributed fairly”.

    8. Going from 35% to 39.6% tax rates is like a bum asking for that extra nickel in your pocket. Not gonna solve a thing.

  10. I’m sick of the bullshit line that the Bush Tax cuts were just for “the wealthy”. Those cuts were across the board. Now that Obama has decided to play chicken with the GOP and our economy again, everyone has rewritten the script about the cuts themselves.

    Oh and just to remind everyone, the US Govt collected the most amount of revenue ever after the Bush tax cuts.

    Raise taxes, less revenue.

    Lower taxes, more revenue.

    This ain’t freaking rocket science folks.

    1. Taxes on the rich are not about revenue. They’re about fairness.

      1. I thought they were about “Fuck you, that’s why.”

    2. I spare with hardcore lefties on a regular basis, they’re actually delusional about this type of thing. They think repealing all of the Bush Tax Cuts will help the lower classes because even if their income taxes go up, they get more back in benefits.

      They think private money in politics creates corruption because the government cannot manage it and distribute it to approved candidates.

      The Lakoff stuff (like zombie did) is really worth reading, they’re actively trying to create their own reality.

      And they gobble this up because as long as their masters are right, so are they.

      1. spar, not spare, but whatever, I went to government schools!

        1. Alas, I was also in the prison school system.

          A couple of teachers taught me Ayn Rand though, but not much else about free markets.

  11. Woman admits $1 million nutrition-benefits scam:

    A Savannah woman has pleaded guilty to stealing more than $1 million in federal funds, joining five other defendants from Atlanta and Decatur in admitting their roles in the scheme.

    The Savannah Morning News reports that 37-year-old Litricia Allen pleaded guilty Wednesday to taking part in a scheme that netted more than $6 million in food stamps and nutrition-assistance benefits.…..85606.html

    1. How is it a scheme to get what you need to address your nutritional needs? It wouldn’t be called nutrition-assistance if she didn’t need it would it?!?

      Random side note related to this, I tend to get the EBT balance receipts at at Meijer (basically Great Lakes area Wal-Mart) because they seem to print out after the normal receipt and are shorter and get stuck. (Bottle return receipts are the same.)

      1. Amazed who gets EBT.
      2. Amazed at how much they get.

      Sometimes I see 35-55 white males leaving these. Which makes no sense, because of their privilege.

      And for everyone, seen or not (since they’re left in the machine), they often have $500-700 left. I’ve even seen $950 left!

      That can’t be a month can it? I could never spend that much on food in a month and maintain savings.

      1. Hell, even on the low end I could probably double what I eat in a month.

        And then couldn’t work because of the extra pounds I add…

        Wait, why am I telling you people this!

      2. Maybe the guy has five kids.

        I’m a single guy and I easily spend $500+/month on food.

        1. What’s your income though?

          I mean, I’m single and could spend $500+ too, but I don’t qualify for EBT or anything and aren’t even middle class either.

          Didn’t mean to begrudge anyone who spends that much on food. Especially if they earned it. Just that if I could I’d eat like a fucking king on what they get from the government.

          And just to anecdote, if I followed these guys out to their cars I wouldn’t be surprised if they have faculty tags. This is a college town.

          1. benji|7.27.12 @ 1:41PM|#
            “And just to anecdote, if I followed these guys out to their cars I wouldn’t be surprised if they have faculty tags. This is a college town.”

            Who better to game the system?

  12. Why Are Keynesians of All People Calling for Tax Increases in a Crap Economy?

    I don’t think it has anything to do with Keynes at all, at it is in fact simply a reflexive instinct of Democrats in power = “What makes most sense to people and what will get us re-elected is the opposite of whatever Republicans are calling for”

    Most librulz don’t really understand the implications of the ‘Bush Tax cuts’ beyond the fact that they have the name of the Evil One attached to them. I’ve met plenty of people who “make less than $250,000” who don’t understand how they themselves are also affected by different provisions of the expiring *rates* (I refuse to call them ‘cuts’). Most of them are usually Yuppies. The working class guys I meet *all* know the increase in taxes are bad. But the progressive Yuppies think anything bad for ‘rich’ people somehow ends up being good for “them” (Them being an amorphous conception of a collective, “us”, aka, ‘the good guys’, the ‘99%’).

    The union democrats, the working class types…No so much = they actually save money. Contractors I know are pissed as hell about the “$250,000” #. That’s for *households*. Basically, $125K per spouse is a living wage in NYC. The whole increased capital gains stuff irks them as well. Not so the starry-eyed Obama-ites. There are some progressives who simply think anything that makes money or a profit is somehow tainted and impure.

    1. Are you really suggesting a living wage in NYC is 2.5-5 times the median income? Despite the fact that poverty rate is about 30 points below where the median income falls? That’s just ridiculous.…..ity#Income

  13. These are probably the same people who say wages are sticky downward so we need inflation to lower unemployment but we need to raise the minimum wages to protect the poor who are hurt by this policy.

    1. Yep. Even better, they’re also the same people who say that the payroll tax cut was wonderful, never mind the fact that the payroll tax is supposed to fund their beloved Social Security, Medicare, and Medicaid programs.

  14. Why Are Keynesians of All People Calling for Tax Increases in a Crap Economy?

    Because they are not Keynesians. They are people who like to invoke the name of a well-known economist as a cover for their complete lack of economic understanding.

  15. Because they aren’t Keynesians? They just want the government to control as much wealth as possible, damn the consequences to growth.

  16. “Why Are Keynesians of All People Calling for Tax Increases in a Crap Economy?”

    Because Fuck You, That’s Why.?

  17. Fantastic article by Robert Murphy, pretty much puts hammer to nail on the coffin:


    The Myth of Wartime Prosperity: World War II didn’t improve the average American’s standard of living.

    Let us suppose, then, that the government today did exactly what Paul Krugman recommends, and engaged in massive government purchases comparable to those during World War II. Yet rather than build tanks and bombers, instead the government today buys socially useful things (in Krugman’s vision) such as roads, bridges, parks, the services of additional police and firefighters, etc. If things turned out today the way they did during the war years, would Americans be happy with the result?

    I suggest they would not; they would reject the bargain, even on Krugman’s own terms. Suppose people took today as equivalent to 1941, and then the country proceeded to have similar government spending and economic performance as the official statistics show happened during World War II. That means private economic output would fall a total of 55 percent between now and 2015, or at an annualized rate of about 24 percent per year. Does the average American household right now want to suffer a 24 percent annual drop in their private standard of living, for three years in a row? This would put their standard of living back to around 1984 levels . . .

    1. Graph says it all. Impossible to deny the reality of crowding out, which is what you would assume if the laws of micro are correct —


  18. In more “full retard”-related news: Liberal author (with no apparent graduate level economics training – but rather, ‘advanced degrees’) publishes report saying, “GDP is full of shit as an indicator of positive economic activity because it doesn’t distinguish between Good activity and Bad activity (‘good’, naturally being things that reduce inequality and make progressives happy). Example:

    ?GDP does not distinguish between spending on bad things and spending on good things. By this measurement, the BP oil spill in the Gulf of Mexico “positively” contributed to the economy just like the many good and services that people actually want or need.

    ?GDP doesn’t account for the distribution of growth. Our total national income has doubled over thirty years, and so has the share of national income going to the wealthiest households, but average households have seen little or no income gains. GDP doesn’t care if growth is captured by a few or widely shared.

    ?GDP doesn’t account for depletion of natural capital and ecosystem services. If all the fish in the sea are caught and sold next year, global GDP would see a big boost while the fishing industry itself would completely collapse.

    ?GDP doesn’t reflect things that have no market price but are good for our society, like volunteer work, parenting in the home, and public investments in education and research

    1. ?GDP doesn’t come over to your house when your parents are away and lap dance for you, and other nice things, but then gets you in trouble with her pimp.

      Shit, ’bout as relevant as what that guy was saying. Do you have the link?

        1. I found similar stoopid, and from a guy with “Ph.D” after his name:


          Which just shows, having a Ph.D doesn’t automatically mean you’re intelligent.

          1. Glimmer of hope in the comment section, though:


    2. “If all the fish in the sea are caught” is as stupid as “two men arguing over cutting down the very last tree on Earth”.

      Both examples courtesy of leftist “thinking”.

      1. I think fisheries are somewhat more strained than forests. That said, there will still be fish, just not necessarily the kinds that people eat.

    3. If everything suddenly got more cheaper to manufacture prices would drop…and GDP would go down.

      GDP, as it is measured, views increases in productivity as a negative.

      GDP is imperfect. In fact it is more imperfect from a libertarian perspective then the unicorn oil spill fairies of the left. That being said it is good proxy of a nations wealth, standard of living and a comparison from one year to the next.

      1. The worst aspect of GDP is that it considers government spending as equivalent to business investment or consumption, instead of the unalloyed negative that it is.

    4. ?GDP does not distinguish between spending on bad things and spending on good things.

      Huh? The oil spill was a bad thing which reduced GDP. The cleanup was a good thing that increased GDP. Pretty sure the distinction is made.

      ?GDP doesn’t account for the distribution of growth.

      Then use median GDP. It’s still GDP.

      ?GDP doesn’t account for depletion of natural capital and ecosystem services. If all the fish in the sea are caught and sold next year, global GDP would see a big boost while the fishing industry itself would completely collapse.

      So I suppose the collapse of the fishing industry wouldn’t show up in GDP? This guy’s an idiot.

      ?GDP doesn’t reflect things that have no market price but are good for our society, like volunteer work, parenting in the home, and public investments in education and research

      1. Education is accounted for in GDP, you fucking moron.

      2. Parenting is an investment that shows up in GDP down the road.

      3. Volunteer work doesn’t show up, but it should be discouraged anyway. What you should do if you want to give to charity is work more at your job and donate the extra money you made, as that takes advantage of specialization. At which point it shows up in GDP. Having software engineers build houses for poor people while construction workers are unemployed is called stupid, even if it does make you feel all warm and fuzzy inside.

  19. More on the theme of “idiotic political rhetoric masking as economic analysis” =

    Conservatives undermining our economic recovery

    Today’s weak economic growth numbers were as predictable as they are disheartening ? and the blame lies squarely with those who opposed the president’s American Jobs Act nearly a year ago, and have in fact opposed an array of sensible economic policies to expand public investments……..2012-07-27

    Author is, of course, from the ‘non-partisan’ (spew~!), Center for American Progress

    I used to be surprised there was so much “progressive liberal rhetoric” floating around the financial markets-reporting (e.g. Bloomberg, MarketWatch, Reuters, Yahoo Finance, et al)…

    …then I realized that most of the stuff is written by career Journalists who just happened to end up on a “markets news” beat; its not like they’re coming there after 20years of working as a trader.

    At least much of it is counterbalanced by experienced financial people. Many people in the industry often become ‘libertoid’ more or less by osmosis just because you start to see how pernicious government interferences become in marketplaces. To wit: Peter Schiff is now currently horse-whipping some farmer on CNBC over subsidized crop-insurance bullshit.

    1. ..then I realized that most of the stuff is written by career Journalists who just happened to end up on a “markets news” beat; its not like they’re coming there after 20years of working as a trader.

      I am pretty sure when it comes to the FED and Keynesian economics most hypothetical traders turned journalists would not be much better.

      According to the New York FED Keynesian economics and FED polices account for 50% of the stock markets value.

      A trader would not poo poo the great bubble generator.

      1. Good point, actually. I remember when I wrote “trader”, I blinked, and thought, “well, but then again, all the traders I know don’t give a shit about fundamentals or macro stuff”…but then Lazy-Me went, “aw, fuck it, the point is that these writers don’t know the world from the inside in any respect, so who cares…”

        I was (and am/have been) both a macro economics analyst as well as individual-sector equities guy. I was only on the Street (in the sense of being in an investment bank doing the 24/7 hyper-detailed awareness thing) for a very few years. My point was basically, “unless you have been on the inside of that world in some way, commentary on it tends to be pretty retarded”.

        your point that Bubble-Making is quite applauded on ‘the floor’ versus the ‘upper decks’ (where the macro-econ guys and the funamentals analysts are cooped up), where its more of a concern… spot on. Still = until you have danced with the traders, you don’t understand how the business works. The job is to Make Money. And all events, good or bad or whatever, present possible ways to do so. Its a fascinating world, and if you don’t know how traders think, then you’ll miss some big picture things. (e.g. = I think the rally this week is just opportunism: no one really believes that the EU is any way improved… just that a news event presented an opportunity)

  20. I don’t necessarily oppose Keynesian economics – it’s just our debt was too high already. Good article pointing out incoherency on the Left.

  21. Modern politicians, predominately, though not exclusively, of the Left, have latched onto Keynesian economics as an excuse to spend, spend, spend, utterly ignoring the rest of his prescription to save, save, save when the economy is robust enough to allow that.

  22. “…to the point that under Bush spending rose far faster than revenues did…”
    The last budget written by a Republican congress (FY 2007)had a $187 billion annual deficit.Yes the Republicans have gone along with the welfare state but hanging half the blame on them is like saying Mussolini started WW2 in Europe. The prime movers for all this spending and its prime defenders are all Democrats. Step one in ending the Obama Depression is to defeat as many of these ‘neo-Keynesians’ (AKA Marxists) in November.

    1. Remind me again when was the last Obama budget that we passed?

      $16 TRILLION in debt. Thanks Obama.

  23. The problem is the Keynesian economics as practiced by modern liberal politicians is a lie. The lie is that government consumption adds to GDP. Let’s assume that the government borrows $1T more than it takes in, and spends it. That $1T does NOT add to GDP. Here is why:

    1) Before that $T got borrowed it was in the hands of private companies and individuals who would have spent or invested it. Since its owners were private we can assume that they would spent it or invested it in something worth at least $1T. So when the Federal government borrows that money we give up the $1T in benefits that we would have gotten from what its previous owners would have spent it on or invested it in. This is a $1T opportunity cost which has to be subtracted from the $1T benefit that we get when the government spends the money. So now the net effect of the $1T government spend is zero.

    2) In addition, we have a $30B per year interest bill to pay forever (assuming a 3% interest rate). If we bring a perpetual annuity of $30B a year forever back into the present that is $30B/.03 or $1T. So now we levy a second cost against the loan which is the present value of the interest payments or another $1T.

    So when the Federal government does what it is doing this year (borrowing $1T and spending it), this actually subtracts $1T from GDP (if you consider opportunity costs and the present value of commitments over time).

    So Obama and is liberal allies are economic idiots practicing a lie.

    1. I know GDP is an imperfect way to measure economic output, but I think you are slightly confused. You are correct that government borrowing must necessarily crowd out private investment, however the money doesn’t just disappear. I agree that the private sector will generally make better use of the money than the state, and will generate much more positive returns going forward, however from a purely accounting standpoint government spending is a valid component of GDP. I still question GDP as a very useful measure of economic output though.

  24. Liberals only know Tax and Spend. Nothing else makes sense to them.
    They divide the country, and blame W, Mitt, Tea Party, etc for everything.
    Liberals are destroying our once great country.

    1. As opposed to borrow and spend?

  25. Simple. While this particular set of tax cuts is not perfect, it is a rare opporuntity to increase taxes with the filibuster working WITH the ability to increase taxes rather than against it.

    While in the short term these tax increases are sub-optimal, they are good in the long term, so we will take what we can get when we can.

    Is there anything really hard to understand here?

    Btw, the economy has been growing for over two years. It’s time to grow up and pay our bills, even if it hurts a bit in the short term.

  26. The Europeans have been tinkering with the idea of a fiscal golden rule but have made little headway.
    In France, Sarkozy wanted to write it into the constitution but he needed socialist votes to succeed and couldn’t find them.
    Hollande, his socialist successor, has ruled out a constitutionally enforced golden rule while he is president.
    The reason, of course, as the article says, is that if citizens had to divvy up extra taxes to cover the shortfall between what the revenue raises and what the government spends, they would realise how ruinous social democratic deficit spending is.
    The socialists are pretending instead that big new income and inheritance taxes will solve everything. Unlike Obama, they have managed to push these through.
    It has to be said that voters are complicit with the politicians in ignoring the cost to be passed on to future generations.
    The twist is that opinion polls regularly bemoan parents’ fears that their children will be less well off than themselves. At the same time, they vote for parties that make this outcome more likely.

  27. When you are using tax cuts to encourage spending (particularly in a demand-side recession such as this one), only a portion of those rebates go into actual spending. Just because Uncle Sam sends out a check for $100, doesn’t mean that the recipient goes and spends that $100. They save a fraction, and spend a fraction.

    People that are cash strapped typically spend most of the tax rebate when it comes in. However, the wealthy (such as those making over $200k/yr) end up either saving it, or in the case of the really, really wealthy, are less likely to use in ways that do not help the economy one bit.

    For the poor, for every $100 you give them, they may spend $95, but those making millions a year, they may spend only $5 and hoard the remaining $95.

    1. “They save a fraction, and spend a fraction.”

      Oh, they stuff it under their mattress! Of course!

      Look dingleberry, what the fuck happens to a dollar when you put it in the bank? It gets loaned out and somebody spends it!

  28. In the case of stimulus spending (fixing bridges, repairing roads, etc), when you spend $100, you add $100 of demand to the GDP, AND a portion of that gets collected back as taxes. In these cases, every $100 the government spends, they get a multipler, and may actually get $100 of labor for $65 (assuming $35 gets recollected as taxes). If the government spends $150, they get $150 in labor for $100, after the taxes the government gets back.

    The whole point about the tax credits for the rich is that they are highly ineffective at increasing demand. You can spend $100 to get $5 in extra demand when you give it to the very wealthy, or you can spend $100 to get $95 of demand from the poor, or you can spend $100 to get $100 of demand and get $35 back. Anybody who can add should understand that the direct spending of money provides the biggest ‘bang for the buck’, and giving tax breaks to the rich provides the smallest ‘bang for the buck’.

    Keynesians are not arguing that tax cuts for the rich are bad..They are arguing that they are the least effective way available to the government to stimulate demand. And right now, it is lack of demand that is holding companies back from hiring, and keeping us in this recession.

    Anyone who wants to use Keynesian economics to evaulate whether a plan is good or bad really needs to understand how these multipliers work.

    1. “The whole point about the tax credits for the rich is that they are highly ineffective at increasing demand.”

      Right. Because it gets stuffed under a mattress.

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