Keynesianism 101

Personally, I blame the American Education System.

Econ 101

Governments are not people.  People are not governments.  Governments live forever.   Governments can print money.  Governments get most of their income through taxing.

When times are good, a government should save.

When times are bad, a government should spend.

It’s completely the opposite of people.

If you spend when times are good, you get a bubble.  Those are nasty when they pop, if you will recall from recent history.

When you save when times are bad, you choke off the economy and end up with even less tax revenue.  Apparently nobody alive remembers Hooverism and the Great Depression.  It is tragic (and was tragic at the time, too).

So yes, take all of this hatred of the debt that should have existed when Bush was touting his tax cuts and remember it for the future when the economy is back on track.  But don’t keep food from people who need it NOW.  Don’t cut off education NOW.  Don’t stop spending on infrastructure.  Yes, think of efficient ways to use money that will benefit the entire country 20, 30 years from now.  But paying off the debt is not one of them.  Forcing it to be paid off in the future, sure, but not paying it now, not at the expense of real people’s lives and the ability of the US economy to ever grow again.

I don’t normally comment on or link to the Huffington Post articles my mom sends.  (There’s often a lot of rhetoric without a commensurate understanding of the difficulties of governance.)  But I think Robert Reich does an excellent job explaining what I just tried to explain here.

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5 Responses to “Keynesianism 101”

  1. Everyday Tips Says:

    This economy is a little puzzling, that is for sure. For instance, I live in one of the most depressed states, yet there is more road construction going on here than I have ever seen before. (Not complaining, I am just surprised.)

    Our city is under threat to close the library in a few months, the police force is going to be cut, it is a real mess. To me, these are necessities and they are on the chopping block. The tax base in my city has just been decimated by the amount of businesses that have gone bankrupt and the fact our home values have dropped dramatically. There is so much fear that I am not sure that spending to keep the economy going can be justified. Don’t get me wrong, I understand the point you are making. However, I think fear plays a huge part in buying decisions, and I think many people are just plain scared.

  2. nicoleandmaggie Says:

    Yeah, a very big problem is that we need to send MORE stimulus money to states and local governments to keep these necessary services. State and local aren’t like federal governments– they can’t print money to pay their loans and they can go bankrupt. So they can’t legitimately spend their ways out of recessions, especially in balanced budget states. Federal stimulus is needed. Some cutting is good, but the cutting of basic necessary services is going too far and has these really negative spillovers that you’re seeing, especially in terms of fear. If teaching or policing isn’t safe, then what is?

    In that article linked, Robert Reich has a really good suggestion for how to make that federal stimulus money a loan that sets repayment to unemployment in the state. Once things really start turning around in the private sector, the states start repayment.

    Government isn’t doing as good a job as it could taking care of us. But balancing the budget right now is going to make it worse.

  3. undine Says:

    Good post–you’re right. The stimulus money seems to have been our version of the WPA, but we could use a little more WPA funding for infrastructure to keep people working.

  4. Naptimewriting Says:

    Word.

    (I’m not inarticulate. I just play inarticulate on the Interwebs. And I agree but haven’t slept in several years, so will only nod my knowing and wise assent. Nice post.)


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