2011-01-16, 03:54 PM
Cancambo Wrote:If we didn't already have a giant deficit, I'd be more in favor of Keynesian economics. The problem is that we have to stop Keynesian policies sooner or later, yet he continues to spend ridiculous amounts of money, a large portion of which is going to something that hasn't accomplished much of anything (the war on "terror"). Sure, you might die before we have to answer to the debt, but why jeopardize everyone else's future? The USA owes a damn lot of money to the world, and sooner or later we'll have to answer to that debt. I personally think one way we could lower unemployment is to raise incentives for companies to do business within the USA. Maybe we could restrict the power of unions so people like the autoworkers stop bankrupting the auto companies. I understand that we'll never get all the companies to do business in America, nor do we really want them to, but everyone could make some necessary sacrifices to better the unemployment rate instead of taking the easy, dangerous Keynesian way out. Sure, if someone helped pass policies like this, they wouldn't be popular, but that isn't the point. Their job is do what is in the best interest for the nation as a whole, and not themselves.
There is no reason to stop Keynesian Economics. If politicians followed it properly, the National Debt right now would be much lower. What needs to stop is expansionary policies when the economy is healthy and near full employment.
What's so terrible about debt? The Crowding out effect? We're a bit away from that. It could potential cause problems with trade partners, but the only country that invested in American Dollars is China- if they try to kill our economy it will end up destroying theirs.
The massive debt up until 2008 was both parties' faults. Republican Congressmen are almost uniformly against any kind of taxation and favor small Government while Democrats favor higher taxation and more spending. Because the system favors what people think they need / want, and not what is actually good for the country, the result is a low tax with high government spending. (Take little from me, give me a lot back) The economically viable solution is to raise taxes and cut spending on the three big parts of spending: Military and the programs to take care of old / sick people. Getting rid of ear marks, small programs here and there, etc. can't hurt, but the benefit from them is hardly noticeable. But if it's done too soon, the recession will relapse.
Knowing exactly when is difficult, because of Okun's Law. It also means some random polititian a few years down the road is going to be credited with 'saving the economy' because he was elected at just the right time. A 2% increase in the GDP should decrease unemployment by 1%, so to return to 5% from 9% will take roughly 4 more years of proper action. With Congress as it is, nothing will get done. Not sure how that's going to work out.
Forcing jobs from overseas by crippling Unions isn't going to solve much. Something like 2 million jobs have been outsourced ... out of a 150 million work force.
Long story short: The economic theory is fine, but no one practices it. Politics as usual.