According to Barney Frank this country needs to stop worrying about Federal Deficits and the country is in desperate need of a “healthy dose of keynesianism”. I will move beyond the fact that this final word was barely recognizable in the audio clip I heard and move on to the stupidity of the comment. First a quick word on just what Keynesianism is. Basically, John Maynard Keynes the father of Keynesian economics believes that Government can stimulate economic growth through investment in infrastructure and other spending to boost GDP, this isn’t exactly groundbreaking considering the common formula for how to calculate GDP in Econ 101 (GDP = Consumer Spending + Government Spending + Investment + (Exports -Imports)). However, the dangerous part of Keynesianism and the reason why it is largely not used anymore is that he sees excessive savings as dangerous, an odd idea to most people, and that deficit spending in times of economic hard time is absolutely necessary and should be encouraged. In fact true long term economic growth did not occur in this country’s economy until the Free Market was allowed to work and Keynesianism removed from the economy in the 1980’s.
I don’t know which part of this to attack first when I read it. Although, there is some truth to these ideas they are almost always considered the ideas only to use in a last resort especially in a situation like we are in now. If the country had excessive savings and people weren’t spending in the economy when the crisis began I would understand the efficacy of a surge of government spending being the solution, but for the past eight years we have seen a lot of deficit spending and now our deficit and debt our huge. Not to mention the fact that we are at our own debt ceiling, which is very hard to reach so the only way to spend money is printing more which is inflation and even more dangerous. But I will move on to what Barney Frank and what the Democrats in Congress have been arguing.
The Democrats have been pushing hundred of billions of dollars upon hundreds of billions of dollars through Congress in rescue bill after rescue bill into law the past couple months, in fact right now we are closing in on $2 Trillion. Now Barney Frank is saying Americans should not worry about the deficits and just trust that you and your friend know what is best for the economy when you got us into this mess in the first place? Are you kidding me Barney Frank? Come on!! I know Consumer Spending is over-stretched and is now contracting which is part of the economic problem but the solution is not to blow up Federal Spending!!! History has shown that egregious government spending is only a temporarily solution and is only necessary when the consumers have lost confidence in or have lost access to the markets, neither of these have happened enough for government spending to be absolutely necessary. If you throw government spending in too soon you will crowd out Consumer Spending and prolong the recovery, not accelerate it. If the American people should do anything is trust you and your friends less, the government has no more money to throw at the problem.
Yes, the economy is struggling but none of your efforts have done anything to restore the lost confidence created by the collapse you created in the first place with your pushing of Subprime Lending since the Clinton administration. Investors will continue to be more freaked out then comforted as long as you continue to bailout companies, a action people only believe will happen when things are truly dangerous, you will continue to perpetuate the fear not reduce it. Let the market correct itself, let the invisible hand of the market place as envisioned by Adam Smith and perpetuated by Milton Friedman do its job. Get your hands off our economy Barney Frank and Friends; stop adding to the burden of the American people and let the economy recover on its own while the government stays on the periphary.
In a recent ad by Barack Obama he definitively states that “Trickle down economics have failed us”, he believes it is time for a change. Well in response to such a statement by Sen. Obama, I say No. For those of you who do not know trickle down economics, as democrats like to call them, or supply side economics as we economists like to call them. This school of thought argues that economic growth can be spurred on or created by encouraging the production of goods and services which helps money “trickle” through the economy from the businesses to the employees to the customers and back to the businesses thus creating a cycle of the spread of economic growth throughout the economy.
Ok, now back to my discussion of Obama. In his ad he argues that this version of economic thought is now dead because we are going through some serious economic pain right now. What he does not mention is that in trickle down economics both profits and bad times trickle through the economy; just like the economic boom slowly trickles through the economy for everyone the collapse of the credit market and its accompanying economic downturn will trickle through the economy. What Sen. Obama also fails to mention is that this current economic downturn was not caused by supply side economics or President Bush but instead by poor management and oversight as well as risky policies determined to artificially boost home ownership through risky lending practices.
So no Sen. Obama, trickle down economics has not failed us, bad policies and oversight and those we elected to correct/prevent such dangerous policies failed us.
After another economic pummeling on the stock market today with the Dow Jones Industrial Average losing 449 points amid overnight news of a government bailout of AIG and short selling to open this mornings trading many market watchers continue to wonder what will be happening next. As The Hamilton Democracy’s resident economics expert I have created a new page where anyone who wishes to have a better understanding of the current economic crisis and its history can learn all they want, simply follow this link.
Should earmarks, or a better phrase, federal funds be used for state projects? Yes, if a state, which has to have a balanced budget, has a need of additional funds for necessary projects their representatives should be allowed to help bring federal funds to the state to help. Lately, the pursuit of funds like this for local universities and groups for legitimate uses has been brought into question by the media and the McCain campaign, a man famous for attacking the use of earmarks.
Earmarks are a legitimate way for a legislature to get federal money for a needed project in a cash strapped state. These have become more necessary over the years as state budgets have been shrunk, whether because of Bush cutting them off each year, the governors reducing revenue flows as help to the local economy, or because the economy has not been providing the usual revenues. Now I won’t get into the numbers or the legal basis that calls for it, but states are often severely limited in how they can provide for their citizens by the need of the state to maintain a balanced budget each year.
If a state needs a program it is the duty of their legislators to try and get it for them, not for an electoral boost, not for an industry that simply wants favoritism, but for a legitimate need in a state. Are earmarks abused by politicians? Yes, should they be eliminated altogether? No. Earmarks have legitimate uses but should not be used to buy votes.
As the morning continues there will be events to commemorate the lives lost on that clear day in September 2001. At these events and around the country many people will be caught up in the remembrances of the events of that day. But once those events are over there is an important thing to consider, we have not had an attack in seven years…how will we continue to avoid another attack for another seven years. While I hesitate to bring 9/11 into this race, since it has been done too much before, it is a necessary question that must be asked. This country faces numerous threats from countries and other groups and extremists in the world, we need a President who can address them. This was evident in 1992 when the country picked Clinton over Bush, when the country chose to turn a blind eye to the rest of the world. The events of that morning were precipitated by the ineffective foreign policy of President Clinton who needed on the job training in order to learn about foreign policy, throughout his Presidency his staff had to keep foreign policy issues away from his desk since he didn’t really care about them. Do we really need another one to make us stumble back into such a vulnerable position? The next president needs to not only be able to run the country but keep it safe, they need to be ready on day one to keep the country safe
Although the blind eye to Foreign Policy happened again in 2000 it was due not only to the lack of an interest in reality then a desire to stay away from the mistakes of the Clinton Administration for the past several years. As the general election continues one of the biggest issues is not the Iraq war, it is not the housing crisis, nor is it the economy though that is what the polls may say. This country, as much as we would like to stay insulated in our world, needs to open its eyes to the reality of what is around us whether you want to deal with it or not. We need to pay attention not only to the country we live in but the world our country exists within, if we don’t then we are putting ourselves at risk.
The big issue that we should be concerned about is how we can keep the country safe and how can we avoid the next bigger attack. As voters continue to debate Sen. Obama and Sen. McCain you need to ask, who will keep the country safe. Who will lead us on the proper route to win in Iraq, who will take us to victory in Afghanistan, who will be effective in truly getting the nuclear stockpiles safe so that Al Qaeda and Osama Bin Laden can not sneak one into the US and set it off. So when you step into the booth to vote on Nov. 4th forget the speeches, forget the attack ads, look at the issues…who will be able to lead this country where it needs to go next?