Just Say No to Keynesian Economics

During the past few years, you may have overheard references to "Keynesian Economics" in some of the debates about how to improve the economy.  What exactly is "Keynesian Economics," how is it shaping current U.S. economic policy, and, most importantly, is it a good idea?

Well, first of all, "Keynesian economics" refers to John Maynard Keynes, and is a macroeconomic theory named after him.

John Maynard Keynes knows what's good for you

Let me be clear about one thing: Keynesian economics has absolutely nothing to do with Kenya.  There are a surprising number of people who get this confused.  I had some nutcase on Twitter accuse me of being a racist and hating the President because I voiced an opinion about Keynesian policies.  Ummm, no.  (Side note: if you're  going to try and start a fight with someone on the internet, try not to do it about something that is easily disproved by Google.)

Anyway: here is a video taken at the Stewart-Colbert Rally that has some fun with this common misconception:


YouTube | Obama is not a Keynesian, He's an American!
  
Now back to the serious stuff.  Keynesian economics is also not socialism or communism, because it does not advocate actual government takeover and/or ownership of private enterprise.  However, it does advocate a high degree of interference with the private economy.

The Keynesians believe that the private sector creates "inefficiencies" and view the cyclical swings of the economy (booms and busts, inflationary periods, recessions, etc.) as something which ought to be tamed or suppressed.  Keynesians support government control over a powerful central bank, centralized fiscal policy, and other actions and interference by the government with the national economy in an effort to stabilize it.

The stimulus bill is a Keynesian type of policy: the justification for the bill was that the massive spending under the bill would increase consumer spending and thereby "stimulate" the economy.  However, this is a fallacy...or in simpler terms, it's complete and utter crap.

Economic growth (increases in small business profits, personal income, investment income, etc.) leads to an increase in consumer spending, not the other way around.  Think about it in terms of your own life - if you go to the mall and spend all your savings, does that make you richer?  Of course not.  On the flip side, if you get a raise at work or make a profitable investment, wouldn't you possibly be more likely to buy a more expensive car, take a nice vacation, or buy a lovely pair of designer shoes?

Buying these shoes won't make you rich.  However, if you are rich, you might buy these shoes.

Here is a great video from the Center for Freedom and Prosperity that explains all this Keynesian stuff in 5 easy minutes (Seriously, watch it.  It's good for you):

YouTube | CFPEcon101 | Keynesian Economics is Wrong: Economic Growth Causes Consumer Spending, Not the Other Way

So, basically, just like you can't get rich by buying a pair of designer shoes, America can't improve the economy simply by having the government spend a humongous pile of money.

And just to make sure we are crystal clear - the reason the  stimulus bill didn't work was not because we didn't spend enough, but because the entire  underlying concept is fundamentally flawed (or, as I so eloquently wrote earlier, "complete and utter crap").

Finally, let's think about what happens if you spend money you don't have: you end up in debt.  Our country is in a big, gigantic, frighteningly deep hole of debt right now, and apparently it seems that none of the Democrats have heard the saying, "If you're in a hole, STOP DIGGING!"

"Forget a ladder!  I can tax and spend my way out!" (Image originally on BigHollywood.com)

Keynesian policies have no chance of getting us out of this debt or saving our economy; they can only dig us deeper into trouble.

I did a Google image search for Keynesian economics and found a wonderfully snarky illustration of the problem: a T-shirt that says - in Chinese - "Keynesian economics makes sense to me:"  

Keynesian economics = China owns us.

To further drive the point home, Citizens Against Government Waste put out a devastating ad right before the election, warning of what may come if we don't "stop digging:"

YouTube | CAGWmedia | Chinese Professor

So remember, Keynesian Economics = nothing to do with Kenya, the economic equivalent of trying to escape a hole by digging it deeper, and always a bad idea (unless you're China).

Great advice from Frank Torres about contacting elected officials

This is from our friend, Frank Torres, and is reprinted here with his permission.  Frank has an excellent blog at http://franktorresblog.com and I encourage you to check it out: lots of detailed coverage of local political races and one heck of a sense of humor. 

Frank recently wrote some advice for people wanting to know the best strategies for communicating with their elected officials.

Talkin’ To the Man (or Woman) | Frank Torres' Blog

One of my favorite parts of my job is getting citizens involved with communicating with lawmakers. They will bring up issues that they feel very strongly about and I will quiz them, make sure they have covered all of their bases, and see if they have their facts right. Then I will ask them ,“Have you called your Congressman?” or Mayor, or Commissioner, or even Senator. The look in their eyes will a lot of times be one of surprise. “Can I do that?” they will ask, and my reply will be, “Damn straight!” 

Here is the thing: a lot of times when we see our lawmakers in the paper and on the CNN or Fox News; we forget a major point. They work for us. We put them in office and we can take them out. There are a lot of citizens that are a little frightened; they have put their lawmakers on too high of a pedestal and they’re concerned that Lord Voldemort will be on the other side of the phone when they call.

Now there are plenty of reasons to call a member of government but most of the time it's one of these two things: 1. You have a personal problem that they could help with and you would like assistance or an inquiry done, or 2. You would like to voice your opinion on one of the issues affecting your district. If you’ve never called a lawmaker before, here is my short how-to guide of dos and don’ts:

Do: Make sure you're calling the right place! Staffers get about 25 calls a day about issues in another district or an area that they have no power over.

Do: Have all of your info or facts in front of you, and the steps you’ve already taken.

Do: Write down the name of the staffer to whom you’re speaking and expect them to most likely not know every single thing about your issue.  They should be professional, they’re not always friendly, they are very busy and spend the day listening to people complain. It’s a stressful job and they get a lot of crazy calls, which is why you need to be organized.

Do: Have a solution in mind. What do you want done?

Do: Be prepared to download and fill out a form for permission to use your personal info, if you have a personal claim. Ask them if you can fax it back, confirm they received it and ask for a time-line for your claim or an answer to your concerns. It's not going to get done overnight, but then again if it’s a simple request it shouldn’t take months. If it’s about an issue, make sure your call is recorded and ask for a written reply.

OK, Now the don’ts:

Don’t: Be vulgar.  If you are calling an office and swearing a thousand words per minute, you are burning your bridge with that office. If you’re angry, wait until you're not to call.

Don’t: Tolerate bad behavior from them. It doesn’t happen often but they shouldn’t lose their cool with you. Give them feedback, it's public service, guys.

Don’t: Expect mountains moved. If it’s a national issue or a large scale problem thousands are having, then believe that they are probably already working on it and a complicated legislative process is involved.

For the mid-terms I will be paying attention to constituent services. People often forget that you just don’t elect the candidate, but the people around him, as well. Peyton Manning won’t win the Superbowl if he’s playing with a high school team. Then again, he didn’t win it anyways last time around, but you get the point.

Excellent advice, Frank!  Thanks for letting us share it with our readers here.