The economic policies of John Maynard Keynes have been more
destructive to fiscal policy sanity and productivity than the work ethic of
Maynard G. Krebbs.
Lord Keynes was the British economist who advocated deficit
spending by governments, saying spending money the government doesn’t have is
good for the economy. (Don’t try that at home.)
Mr. Krebbs was the beatnik character with a major aversion
to work on the old TV show, Dobie Gillis. At least he was funny. Even funnier,
in a pitifully sad way, is that the U.S. economy would be better off right now
if the federal government adopted a “Krebbsian” policy of doing nothing in the
economy rather than continuing the Keynesian model of being the major player in
everything.
The federal government—under both Democratic and Republican
presidencies— has bailed out bad business people for two years and the
unemployment rate is still high. President Obama is continuing to attempt
spending the country out of the depression. Franklin Roosevelt tried the same
things and the depression of the 1930s lasted until after WWII.
No one—at least no one who drinks the Keynesian
Kool-Aid—wants to look at the depression of 1920. That depression saw
unemployment climb beyond 12 percent, yet the depression was over in 18 months
because the only thing government did was cut spending. Not sexy, but more
effective than anything tried since.
Now, even the land of Keynes is changing its mind about him.
In London, the Chancellor of the Exchequer wants $130 billion in spending cuts
to reduce the budget deficit.
The Irish government is looking to cut spending and increase
taxes. That country’s deficit has reached 32 percent of total economic output.
France, too, is facing budget problems and has increased the
retirement age from 60 to 62 years of age, a move that has 16-year-olds
protesting in the streets.
It’s the United States that believes deficits are good. In a
recent New York Times article, Landon Thomas Jr., quotes Brad DeLong (who
Thomas identified as a liberal economist) saying: “Everything Keynes
established about the primacy of maintaining demand at a steady pace is
gone…Europe obviously thinks it can focus on sound finances while the U.S. manages
world demand, but unfortunately we are not doing that.”
The Keynes’ cure for recession is a failing proposition. A
person can’t spend more than he or she makes without going broke. A family
can’t spend more than it makes and a nation can’t spend more than it makes
without a disaster waiting to happen.
The current debt to GNP ratio is approaching 70 percent and
some estimate it will reach 94 percent by the end of next year.
Maynard Krebbs avoided work. The U.S. government should
avoid spending what it doesn’t have.
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