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Sorry guys, but this "press release" is ridiculous. And it has nothing to do with whether Keynsianism is right or wrong. Please consider the following points:
1. This whole "5th grader press release" seems like some contrived ploy by someone with a blog. How many schools do you know that send out press releases based on some random thing one of their kids said?
2. "Little Johnny" apparently forgot a key part of the Keysnian theory, which is that the money that the government takes in the short term to stimulate the economy doesn't come from peoples' taxes right away - it comes from borrowings (duh). The theory is that the government borrows to spend more to encourage consumption and investment during a recessionary period, thus reducing the length and severity of the downturn and increasing future taxable earnings (because economic recovery set in sooner) by the time that the borrowings have to be repaid.
3. The applicability of the above-mentioned scenario may vary by circumstance; "little Johnny" should learn that the result of economic policy is affected by a tremendous amount of variables and cannot be adequately explained as a "one size fits all" statement. The relative proportion of international trade activity, the status of the nation's currency, the level of debt before the stimulus, the makeup of that debt, and interest rates over time are all factors that can lead to different outcomes of fiscal stimulus. At any rate, little Johnny shouldn't be measuring ROI just against his dad's wallet; he should be measuring ROI against the national "wallet" (i.e., GDP, taxable earnings, and debt) would have looked like without the stimulus as opposed to with the stimulus over the same period of time. This is obviously impossible to imperatively do and will inevitably require some estimation that will always be subject to debate.
Sorry, "little Johnny", but I'm not quite that impressed. And I'm not even a proponent of Keynsianism - certainly not in a blanket sense.
You cannot reward consumption and penalize production and expect prosperity.
Prosperity can only exist when there is a creation, trade and transportation of surplus usable goods and services.
Money is not a measure of prosperity. And no government charged with securing rights is doing its job when it takes from one, and gives to another, under threat, duress or coercion.
Hey, you left out fraud.
What? - I suppose succumbtion to fraud is no excuse?
Ignorance is no excuse when the ignorance is intended upon you by the government?
What is funny reading it is that it takes a single financial equation, the discount bond formula over 1 year, and tries to prop up 50 years of debate against this theory. Like some one with a new $50 hammer sees everything as a nail. I wonder how long before he spun this fiction he learned about it for the first time.
I won't begrudge people wanting to base their political facts on fiction spun by insane partisan nut cases. I will point and laugh when they get strung along (like the rats after the pied piper) to vote for something that screws them, a moment before realizing it's their own idiot fault. That face is priceless.
What is funny reading it is that it takes a single financial equation, the discount bond formula over 1 year, and tries to prop up 50 years of debate against this theory. Like some one with a new $50 hammer sees everything as a nail. I wonder how long before he spun this fiction he learned about it for the first time.
I won't begrudge people wanting to base their political facts on fiction spun by insane partisan nut cases. I will point and laugh when they get strung along (like the rats after the pied piper) to vote for something that screws them, a moment before realizing it's their own idiot fault. That face is priceless.
I'd hope that scores of millions of millions of people who voted for Obama are showing that priceless face right about now. Furthermore, no fifth grade math teacher I'm aware of, when teaching simple division, talks about discount bond formulas (which I've been around since the mid-80's).
What's funny with many of the comments here, written (even well-written) by obviously intelligent people, is that they refuse to address the simple mathematical points of needing to recover more money than what is started with, due to the transaction costs, which are very high.
Anyone's who's recently lost 25% of their money in the stock market knows this all too well... they need a 33% rate of return to get back to flat. And the numbers just get worse as the transaction costs go up. In the case of the government attempting to "stimulate" the economy, things only get worse via the debt and/or currency devaluation that is incurred by alternative funding sources (book-length commentaries omitted).
I don't doubt the sincerity of Keynesians for a moment in wanting to "do something" good for the economy. It's just that the implementation at this point is permanently and fatally flawed, and there are tragic consequences for continuing to work with such a flawed theory. People remain un-or-underemployed for longer than necessary, overall wealth is decreased, freedoms and liberties are lost, etc, etc etc.
Moderator cut: No links to blogs, please.
If that comes across as the yarn of an "insane partisan nut case", I have no retort.
Last edited by Green Irish Eyes; 07-18-2010 at 03:05 AM..
A lot of excellent points in the citation, especially about the attitude of the lawmaker. He cannot conceive of making the government burden smaller, only larger each year. Which brings us to now, with an economy in veritable collapse. The timeline for when things will get better remains 5 to 7 years in the future--doesn't that tell you that continuing the same massive government policies are a losing proposition? The 5 to 7 years is not saying "that's when Big Government will work," but "By that time people will be in revolt and refuse to send all their money to the corrupt morons in Washington."
It's impossible to try to educate Liberals, who think that the government has a right to as much of the money earned by Americans as it wants to take (what Country is this, again?). And that government should tax "evil" businesses to the max, even though the only businesses surviving are the ones with ridiculously high profit rates (banks and pharmacies) that can afford to pay taxes and bureaucracy of all 3 levels of government. None of these business can be bought by the Middle Class, to share in the wealth. And choices for all of us are vastly reduced.
What's left of small businesses, the main source of jobs for Americans, are fast disappearing. This downward spiral will not change by continuing the same failed policies of Keynes. How long do we have to watch the decline of the economy and the Middle Class? Until we significantly reduce the taxes and regulations that have a stranglehold on the economy, nothing will improve. Why would it?
Business contracts because they are punished for having employees; so more and more are laid off, and government then looks to tax the few people still working (and few companies still in business) even more. Soon we have a few workers, working 80-hour weeks, paying 60% of their salary to the government (and the rest to cost-of-living), trying to support a huge population of the unfortunate, the lazy, and the outright stupid.
The lure of the public dole is becoming irresistible, especially given how much you have to work to have ANY job. Why work your whole life to save for retirement, when the government will use your savings to disqualify you from the Social Security you paid taxes for your entire life? Why have a nursing home run through your savings at $8,000 a month, when if you had no savings, the bill would go straight to the government? Why not work a few months, then jump on the unemployment rolls and have the government pay you for not working, for 2 years or more?
No longer can Americans hope to achieve prosperity, or even retirement, since you can't buy a business or invest in anything that so much as breaks even--even if you managed to save. Jobs are so scarce that even the lousy quality of life that results from being a wage-slave isn't available to most anymore. If you are a wage-slave, you are no longer saving for retirement or your own quality of life--you are paying a huge government to become even bigger, constantly demanding more of your income. The last 3 years of having no quality of life, but working constantly, for my family have moved us farther away from retirement. The huge tax increases of Obama haven't even hit yet.
One thing the government's budgeting offices aren't allowed to include in their calculations of revenue: whether people will quit their jobs entirely when taxes are increased significantly. I hope the majority of government cash-cows, like my family, will join us in "Going Galt" in 2011. I can't stop Government from continuing to kill the economy and encourage sloth, but at least I can stop being the stooge that pays for 100 other people's free time.
So we make up a BS story about a fictitious 5th grader and his fictitious teacher, post links to fake articles and fake Facebook pages, then suddenly everything is legit. Got it. Thanks.
Look, I don't like Keynes either, but I don't need to fabricate a bunch of hogwash to make my point.
The main problem with little Johnnie, is that he thinks that the money being taken from his dad's checks are going to the stimulus directly and wholly. Little Johnnie (or whomever actually wrote the article), seems to be under the impression that the economic model does not have ANY other aspects to it other than his daddy, the investment cycle and return to government.
What little johnnie misses are the number of jobs that will be created with each portion (shall we say $100 from everyone), which in turn creates cash flow cycles from formerly unemployed people, which leads to more people STAYING employed at grocery stores, at fast food stores, at video stores, at movie theaters, and also at State jobs, fixing roads, signs, cutting grass, etc. Each continues with it's own cash flow cycle, each making a small but significant deposit into the investment cyle, the household cycle and finally back to the government. Little johnnie instead of doing a direct ROI on the initial monies withdrawn from daddy's check, should concentrate on the larger direct economic impact that instead of keeping 1 person employed and using the small amount of savings they would contribute, they (the gov't.) can spend monies to stimulate business to employee several people who then contribute many small amounts across the cycle.
I think "Little Johnnie", while doing good for attempting to spout supply side economic theory get's a huge FAIL for Macroeconomic and Monetary policy.
And Keynes' as well as Friedman pwns little johnnie....and his dad. Again.
First, little Johnny probably doesn't exist ... this is just a journalistic stunt.
But you seem not to understand supply/demand side economics ... at least the reality based versions. And stimulus is demand side, but even weaker, in that stimulus is very brief, and the benefits disappear the moment the stimulus money dries up. You end up with roads you don't need, facilities that are unsustainable, and a lot of waste, and a big bill (deficit) that is greater than what you got in return. The only time stimulus might be desirable is if it was directed at needed infrastructure projects that provides long term value. Unfortunately, stimulus is always directed politically in the form of pork projects and bridges to nowhere.
Those that embrace the Keynesian model that got us into the fix we are in now, including all of the debt associated, amaze me. Demand side is a failed model, proven by what we see today.
Anyone that believes government can better decide what to do with people's money than the people themselves can, are either idiots or politicians, or both.
Given the well established record of government screwing up everything it touches ... Social Security, VA Healthcare, Medicare, Medicaid, Education, War on Drugs ... somehow ... I just don't see them capable of managing a complex economic structure. And low and behold .. here we are ... bankrupt, broke and out of work ... manufacturing gone .. and on the precipice of another Great Depression that is likely to be worse than the first one.
I demand that we stop the demand side nonsense immediately.
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