Razing Keynes

I'm no fan of John Maynard Keynes. Neither am I a fan of misrepresentation of the ideas of "intellectuals" for political expediency. Keynes is praised by liberals and damned by conservatives for economic policies he never advocated and in all likelihood would not have approved of. It is true that deficit spending is a key piece of Keynesian economic theory. But deficit spending in itself is simply deficit spending. It is not Keynesian economics.

Keynes economic theory required fiscal responsibility in boom times to offset the fiscal irresponsibility that he asserted would reinvigorate the economy when things went bust. Contemporary liberal economic theory says that the government must exhaust increased revenues in boom time in the name of social justice and must turn to deficit spending to spur the economy when things go bust. They call this "Keynesian economics" in an effort to co-opt Keynes and lend the credibility of his simply hair-brained scheme to their ridiculously hair-brained scheme. Conservatives respond by vilifying Keynes.

To modern day liberal economists the time is always right for deficit spending. For conservatives, the only time deficit spending is tolerated is for national defense. In modern political terms, Keynes would represent an economic moderate. He was clearly not an economic conservative, but neither was he the socialist that the left paints him as. Vladamir Lenin said "A lie told often enough becomes the truth", and he was almost right. It is the lie that goes unchallenged often enough that becomes the truth. By allowing the current economic schemes to be labeled "Keynesian" conservatives have allowed the left to add credibility to a socialist agenda. Once again we see the right allow the left to establish the debate on a foundation of unchallenged intellectual dishonesty.

Once upon a time I had the privilege to attend a conference for TEA party activists. In a gesture toward non-partisanship a session was offered with the title "How Independents and Traditional Democrats who support the TEA Party Movement core values can challenge Left Wing Democrats in the 2010 Primaries". The leader of the session was well known economist and 2010 US Senate candidate Warren Mosler. Mr. Mosler made a strong case for a drastic reduction in taxes, even a tax holiday, to invigorate the floundering US economy. Ok so far. As he continued to speak it became clear that his position on lowering taxes was merely situational. Low taxes had no inherent value to Mr. Mosler, they were simply a mechanism to address a transient economic state. At the end of the session I challenged Mr. Mosler by asserting that he would be just as quick to raise taxes to cool the economy and consequently grow government; a position at odds with "Tea Party Movement core values". He held firmly to his position that it was the only way to maintain a stable economy. Unfortunately, many of the attendees were just happy to hear an "Independent" advocate cutting taxes.

Mr. Mosler's theory is essentially a variation on Keynesian economics. Both plans call for the government to actively control the economic thermostat by pumping money into the economy in bad times and pumping it back out in good. Both of these plans illustrate an academic, theoretical view of the relationship between the government and the economy.  They are liberal in their presumption of a benevolent government that will act responsibly with surpluses in good economic times to prepare for bad economic times. It is this naivete that ensures the failure of these systems. Government has never illustrated an ability to restrain itself when presented with a surplus. An increase in revenue is always followed by an increase in government. In a purely Utopian sense Keynes and Mosler have interesting theories. In the real world they are just wishful thinking.

The next time someone uses Keynes to support a "stimulus" package, tell them first of all that Keynes wasn't really all that great, and secondly that what we're getting from Washington isn't Keynesian economics.