FT161: “Only in government can rank amateurs be put in charge of industries.” —Old Pithy

Posted by PITHOCRATES - March 15th, 2013

Fundamental Truth

Politicians love Keynesian Economics because it’s a Pathway to European Social Democracy

For years now we’ve been hearing about President Obama’s efforts to create jobs.  Going all the way back to that laser-like focus he was putting on job creation.  And there was that $800 billion stimulus bill.  That stimulated little but Democrat campaign contributors.  The president has been talking about job creation for a long time.  Yes, he can talk the talk.  But he sure can’t walk the walk.

A big reason why the economy is still so anemic is in large part due to Obamacare.  The onerous requirements of the new health care law have frozen new hiring.  And dampened business growth.  For all those small businesses that are just starting up and trying to gain some traction see massive new costs coming their way.  On top of the massive costs they’re paying already.  From taxes.  To regulatory costs.  Increasing the cost of doing business.  And leaving less and less to reinvest into their business.  So they can grow and hire new people.  Creating jobs.  Which is something the president claims he’s all for.  Yet it is his policies that are preventing these job creators from creating jobs.  And there is a reason for that.

The president and the Democrat Party (and many in the Old Guard of the Republican Party) are Keynesians.  And they believe in the economic policies of John Maynard Keynes.  Which ushered in the era of Big Government.  And massive interventions into the private economy.  A substitution for socialism.  Providing a pathway to socialism.  As in the European variety.  Those social democracies that are all wallowing in the European sovereign debt crisis.  Because their governments grew too large.  Intervened too much into the private economy.  And spent far too much money they didn’t have.

Nixon, Ford and Carter tried Keynesian Economics on a Grand Scale once Nixon Decoupled the Dollar from Gold

All government economists are Keynesian economists.  The Keynesians tell their friends in government to keep interest rates artificially low to stimulate the economy.  Because they believe that even though consumer demand isn’t there businesses will borrow this cheap money and expand production.  And hire more people.  Also, if the economy is not performing as it should be the government needs to spend money.  With make-work programs. Paying people to do things like dig ditches.  And fill them back in.  Because they will take their earnings and spend it.  Creating economic activity.  And the government should do this with deficit spending.  Spending money they don’t have.  Either by printing it.  Or borrowing it.

They have been trying this since World War I or so.  In fact, Keynes met with FDR.  Telling him about his economic theories.  Some of which FDR took to heart.  For he did increase the size of government.  And he spent money on a lot of make-work programs.  None of which pulled the economy out of the Great Depression.  And he tried for over ten years.  Nixon, Ford and Carter tried Keynesian economics on a grand scale.  Once Nixon decoupled the dollar from gold.  Stopping the gold flow out of the country due to Nixon’s inflationary policies (foreign governments said if you want to make the U.S. dollar worthless we’ll take the gold instead at the promised exchange rate of $35/ounce).  Once they no longer had to honor that promise they were able to print even more money. Unleashing an inflation that reached double digits in the Seventies.  And caused massive unemployment and stagnant economic growth.  Stagflation.

This was a failure of Keynesian economics.  For the theory went if you have a recession you used inflation to end it.  And you did that by printing money.  But instead of an improved economy all they got was inflation (and higher prices) to go with an already bad economy.  Which just made everything worse.  Had they continued the classical economic policies that made America the number one economic power in the world (thrift, low taxes, low regulations, the gold standard, savings, etc.) there would have been no inflation.  And there would have been a lot of new economic activity.  Because this is what happened in the past with these policies.  While every time Keynesians tried to spend their way out of a recession it has never worked.  As the historical record clearly documents.

Obamacare will do to Health Care what Government has done to Businesses in our Big Metropolitan Cities

Now either those in government don’t understand this.  Or they do.  And just don’t care about the economic damage they cause as they are more interested in expanding their control over the private economy than they are about the American people.  Which means they’re either not very smart.  Or they’re devious.  Lying to the American people just to advance their agenda.  A larger and more powerful federal government.  Compounding this problem is that most of our politicians don’t understand the first thing about business.  Most are lawyers who think businesses are little more than cash piñatas.  Good for suing.  Or taxing.  But they have no idea how they work.  Which builds the case for our politicians not being very smart.  As well as being devious.

Worse, it’s these same people who are regulating the hell out of our businesses.  These people who don’t understand the first thing about running a business.  But are killing small businesses with costly regulations.  Especially in the big cities.  Where there is so much costly red tape to cut through to open a business.  And to run a business.  Especially if you want to hire employees.  A regulatory nightmare few business owners ever expected.  And so complex and costly that a lot of businesses fail because they don’t charge enough to cover all of their costs.  But these politicians don’t care.  As evidenced by the amount of business they drive out of large metropolitan cities.  Detroit once was the automotive capital of the world.  But the city government grew so large and costly that the costs of doing business in Detroit soared to pay for it.  Making it just too costly to do business in Detroit.  So businesses left.  First the jobs left.  Then the people.  The two greatest employers in Detroit these days are the City of Detroit.  And the Detroit Public Schools.  Both paid with tax dollars.  Generated by businesses.  That are no longer there.  So facing bankruptcy due to the crushing costs of government (primarily pensions and health care benefits), the governor declared an emergency.  And assigned an emergency manager to fix Detroit’s finances.

Now the people who destroyed the business environment in our big metropolitan cities are taking over health care.  Who know even less about health care than they do about running a business.  There are some doctors in Congress.  But only approximately 3.7% are doctors.  And only 16 of the 20 are Republicans.  So they will have little say with the Democrat-passed Obamacare.  While Obamacare will do to health care what government has done to businesses in our big metropolitan cities.  It will destroy it.  Because health care is very complex.  Doctors spent some 8 years of schooling to become a doctor.  And spend their career in continuing education to stay current in their fields.  But who will be managing these professionals now?  Rank amateurs.  For only in government can rank amateurs be put in charge of industries.

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