Those who do not remember the past are condemned to repeat it.
~ Santayana, “The Life of Reason,” Vol. 1
Prologue to a catastrophe
As President Obama’s now $1.2 trillion dollar economic stimulus plan goes from the House to the Senate and now back to the House for final ratification, a growing chorus of critics and people of good will of all political stripes have arisen and are wondering out loud – Is Obama’s economic stimulus plan America’s salvation or Keynesianism on crack? I think it is the latter.
Yesterday the latest person in the media to make this obvious metaphor to Keynes and crack was former GOP congressman and host of his own morning show on MSNBC, “The Joe Scarborough Show.” I don’t always agree with Joe because being on a radically liberal TV network, he often sells out his conservative principles to get along with his co-host, the outspoken Mika Brzezinski, daughter of Jimmy Carter’s National Security adviser, Dr. Zbigniew Brzezinski. Dr. Brzezinski is also a frequent guest on the show. However, here Joe is right to characterize Obama’s economic stimulus plan as Keynesianism on crack.
Who is this Keynes fellow?
John Maynard Keynes (1883-1946) was a controversial and colorful Cambridge-trained British economist and Cambridge professor whose ideas Obama’s mentor, FDR scrupulously followed during the 1930s, prolonging the Great Depression. Keynes was the person who came up with the then-radical notion that a government can bring a country out of a deep depression by excessive spending. That’s right – no savings, no economic discipline, no fiscal responsibility. Bankruptcy and foreclosure under a Keynesian model encourages government to spend, spend, spend and spend itself back to prosperity.
Last month on National Public Radio Keynesian economics was featured in a program by Adam Davidson and Alex Blumberg, relating Keynes’ theories to Obama’s economic stimulus plan:
Many would argue that Keynes’ 73-year-old theory is being tested, right now, for the very first time. One Keynes biographer, Lord Robert Skidelsky, portrays Keynes as a fascinating figure, equal parts genius and jerk. Keynes ran with the Bloomsbury Group, which included painters and writers such as Virginia Woolf. The Bloomsbury crowd was known for free love and raunchy language, but even they complained in letters to each other that Keynes was too dirty for them.
Keynes could be just as shocking when it came to academic theory, sounding like a socialist one moment and fanatically defending free markets the next.
The one constant was Keynes’ faith in the elite. He generally believed that almost any problem could be solved by getting together young men who had been schooled at Cambridge and asking them to take over. He even wanted Cambridge men to run America, because he didn’t think anyone in the U.S. was smart enough. He also didn’t like Jews, the French or the working class.
And herein America finds herself in the apotheosis of FDR with President Obama who calls himself FDR, part II – If FDR was John the Baptist then surely Barack Obama is the Messiah? Can Obama achieve economic redemption in 2009 under a Keynesian model where FDR failed to achieve it in seven years of record-breaking domestic spending (1933-40)? It is a fact that none of Keynesian economic theories, FDRs make-work programs, welfare, bank insurance, Social Security, nor any elements of the “New Deal” brought America out of the Great Depression. What did?
History trumps elitism and theory every time
History has made her verdict and has determined that it was the outbreak of World War II, Sept. 1, 1939, and all of the ancillary war making machinery required to fight the Nazis, Mussolini and the Japanese Axis Powers that put Americans back to work.
Obama, like most socialist elites, thinks like Wilson, FDR, Keynes, LBJ, socialist intellectuals and the academy, that if you have a problem, any problem, all that is needed are very smart people working together to solve the problem. The dilemma with that worldview is that it conflicts with history; most of the world’s problems have not been fixed by “smart” people, but “wise” people.
On Keynes’ elitism, NPR hosts Davidson and Blumberg continued their thesis:
The one constant was Keynes’ faith in the elite. He generally believed that almost any problem could be solved by getting together young men who had been schooled at Cambridge and asking them to take over. He even wanted Cambridge men to run America, because he didn’t think anyone in the U.S. was smart enough. He also didn’t like Jews, the French or the working class.
Keynes wrote that these Cambridge-led government boards should do everything from running individual companies to determining how many babies should be born and, cryptically, of what quality. Keynes was, after all, on the board of directors of the British Eugenics Society.
Space will not permit me to further analogize between Obama’s connections to Keynes and FDR; for arguments sake history has told us that Keynesianism and FDR’s New Deal were a catastrophic failure. Using deductive reasoning, what makes any rational person think that Keynesianism will work in 2009 if it didn’t work in 1939?
Epilogue: 1933, 2009 or oblivion?
How did we get here? Under classical economic theory going back to the Age of Enlightenment and Adam Smith, economists held that when the economy went into recession or depression, then free market capitalism (laissez faire) would eventually correct itself, and over time people would spend money again once prices had dropped low enough to give the average consumer confidence.
Waiting, in the middle of an economic catastrophe, isn’t an acceptable strategy for a bunch of Ivy-League trained socialists and progressives like FDR and his advisers. They wanted people to start spending money now and thought that using the power of leviathan government to do it seemed to them like a good idea. Then came Keynes.
Princeton professor of economics and former Clinton economic adviser Alan Blinder called this crisis “a failure of effective demand.” “The Keynesian prescription is if all else fails, the government can spend the money,” Blinder says. Normally, in a free-market economy, the public doesn’t look to the government to prop up spending. Blinder further noted, “But Keynes’ idea, which was revolutionary at the time, is if the private sector won’t do it, then the public sector can do it as a fill-in stopgap.”
Here is the crux of Davidson and Blumberg’s argument and analogy of FDR, Keynes and Obama’s approach to getting America out of our depression:
Prescribing Keynesianism to some politicians is like prescribing crack to a coke addict. In the 1970s, the patient hit rock bottom. The U.S. had high unemployment, and the Keynesian solution stopped working. The national government spent and spent, but unemployment only got worse. Then came inflation, something Keynesians had no answer for.
In conclusion, Theodore Roosevelt’s “Square Deal” and Woodrow Wilson’s “statolatry,” i.e., state worship or government “experimentation,” didn’t work. FDR’s “New Deal,” LBJ’s “Great Society,” George W. Bush’s Prescription Drug program, “No Child Left Behind” and his $2 trillion Wall Street bailout plan were all abject failures. Past presidents are dead, well-intentioned politicians and bureaucrats are in nursing homes; Nobel Prize-winning economists and academics, despite their theories destroying nations, still collect their pensions without reprisals … and “We the People” are leaving our children and our grandchildren an immoral inheritance to pay the multi-trillion dollar bill when it comes due.
Economic stimulus plan or Keynesianism on crack?
