Obama has extended the Bush tax cuts, which lower taxes even more than Reagan had done.The rich are awash in cash. Corporations are sitting on record piles of cash. Apple computer is sitting on like $80 billion. Are we supposed to give them more and hope for recovery then?Deficits go up automatically in economic down turns. Economic growth falls and revenues fall. Unemployment kicks in. More are poor and qualify for Medicaid. Deficits go up. Obama isn't going on a spending spree.On net there's no Keynsian stimulus. The stimulus package barely offset the reductions in state expenditures. If you don't have a net increase in government spending, how can you say you even tried stimulus?Reagan raised taxes in 1983 and things turned around. Clinton raised taxes and the budget was balanced. Growth was great.
The problem with Keynsian economics is not so much its inefficiency, but its inability to handle the incentives that drive politicians. In order for Keynsian economics to succeed, governments need to save a surplus during the years of growth. But politicians have every incentive to spend extra money to buy votes, rather than save that money for the lean years. I'd like to say that the kind of stimulus that the Kenysians desired was never really possible.Corporations are not hiring because of uncertainty. Businesses want a stable environment. One obstacle here is the uncertainty produced by the health care bill. I'm not commenting on whether the bill, or its intended goal, is ultimately good, which is another debate. But uncertainty caused by pending regulation, good or bad, is going to make businesses reluctant to hire and invest. New regulations always come at a cost to economic growth. The removal of many regulations, and not necessarily the provision of tax breaks (which are probably a bad idea in our current environment, even if I ultimately would like to see taxes at a much lower rate), would be of some help to an economic recovery.
Matt Schultz said:In order for Keynsian economics to succeed, governments need to save a surplus during the years of growth. But politicians have every incentive to spend extra money to buy votes, rather than save that money for the lean years.It sounds like some politicians could take a cue from Joseph in Genesis! :-)
The thing I remembered about the Reagan years was that he lowered taxes and was relentless in fighting to keep them low. And he wanted to remove regulations. He wanted to "get governments off our backs."To some degree, government intervention is a good thing. I'm thinking about seat belt laws and air bags. (I've been in a traffic accident that probably would have roughed me up pretty good if not for the seat belt). But the tax and regulatory burden on small businesses these days is horrific; it's no wonder there is no hiring going on. It's a question of where we want to go: economic prosperity? Or economic struggle.