One would think so — yet under this presidency he will never be allowed to rest in peace.
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Time out for a historical digression. One can’t listen to the left these days order up more and more deficit spending without harkening back to the early 1980s, when Ronald Reagan rescued the U.S. from the greatest financial collapse since the Depression. In the 1970 and early 1980s, the stock market in real terms lost almost 70 percent of its value. Reagan slammed the brakes on money and cut tax rates. The deficits of that era averaged about 5 percent of GDP. Back then many leading Keynesians, including Samuelson, first swore this would never tame inflation and restore growth, then by 1984, when the economy grew at 7 and even 8 percent, they shrugged and posited: this was simply a classic Keynesian recovery. The deficits caused the growth. Never mind that other nations that ran even bigger deficits didn’t grow. And back then, hypocritical liberals trashed Reagan for running deficits they now trumpet as virtuous. One of the few exceptions was Robert Eisner of Northwestern, who applauded Reagan’s deficits. He was one of the few honest Keynesians of his day.
BUT HERE’S THE POINT: if Reagan’s deficits caused a 7 percent growth rebound with deficits of 5 percent of GDP, why have Obama’s deficits, which are twice as large, generated only 1 to 2 percent growth?
The answer is that Reagan’s supply-side, tax rate-cut policies, not the deficits, stimulated production and investment, not demand. In nominal terms, demand grew very little in the mid-1980s. You can’t have a demand-side Keynesian expansion with falling prices; it’s impossible within that model.
The fundamental flaw in the theory of government as pump primer
is that the public sector can
only get a dollar to spend in the first place by parasitically taking it from the more productive private sector, which is why the mythical “multiplier effect” of government spending — the increase in total GDP for each dollar spent by the government — is less than one. Robert Barro of Harvard has found exactly that in his empirical studies on stimulus spending. He found that government spending often crowds out private spending, rather than stimulating it.
But now, in the 21st century, Keynesianism has run into a new and formidable impediment to its deficit theories: global bond vigilantes. They are telling nations that debt-financed stimulus spending has run its course. Interest rates have soared in many eurozone nations like Greece and Ireland. Yet the U.S. is attracting so many bond buyers that interest rates are at 30-year lows. How long can this bubble inflate? Meanwhile, Fed Chairman Bernanke’s zero interest rate and asset purchasing schemes have driven gold to $1,800 plus an ounce, as investors lose trust in paper currencies. Will it take a 2008 style financial panic to get Washington to understand that the free-lunch era is over?
Perhaps the biggest lie from the Keynesians is the premise that — with so many Americans unemployed — we should delay cuts in spending during this soft patch in the economy and lock in long-term cuts in entitlements in future years, when the economy is growing. This is the Obama pitch. But when have Democrats (or even Republicans for that matter) ever in any of our lifetimes said, “Now is the time to cut spending”? Nancy Pelosi has sprinted to the microphone after every negotiation with Republicans pledging that there would be no cuts in Social Security, Medicare, and Medicaid—not now, not next year, not ever. These are the programs that nearly everyone acknowledges are driving the red ink tsunami, with budgets that are expected to climb to $2.4 trillion from $1.6 trillion this year, and yet they are labeled untouchable by the fiscal doves.
Republicans would be fools to fall for the “spend now, save later” gambit. This is the attitude of a teenage girl roaming the mall with daddy’s credit card. It is a promise never to cut spending. That’s because Keynesianism isn’t a real scientific economic theory. As economist Don Boudreaux of George Mason University puts it: “When you get right down to it, Keynesianism is just a convenient excuse for what the left wants to do anyway: spend more government money.” It has left us with a $14.5 trillion national debt and an economy flat on its back.
Now Obama and the rest of Keynesian cult say that if we can just spend and borrow more, the economy will get better and the jobs will come back. If there’s any good news from the events of the last three years it’s that Dick Durbin may be right: almost no sane person really believes that anymore.
A man of faith in a godless age is hitting Americans where it hurts.
Mr. and Mrs. American Spectator Reader, let P.J. O’Rourke talk sense to your kids.
In Britain, defending your property can get you life.
The debacle of this president’s administration is both a cause and a symptom of the decline of American values. Unless Congress impeaches him, that decline will go on unchecked. An eminent jurist surveys the damage and assesses the chances for the recovery of our culture.
It won’t take long for conservatives to scratch this presidential wannabe off their 2008 scorecard.
The American Christmas, like the songs that celebrate it, makes room for everybody under the rainbow. Is that why so many people seem to be hostile to it?
Was the President done in by the economy, or by the politics of the economy?