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Belmont Club

The Ghost of Keynesians Past

December 29th, 2013 - 2:10 pm

A few months ago the Atlantic explained why no one should oppose extensions to unemployment insurance. The unemployed were jobless through no fault of their own. There were three applicants to every job but not enough jobs. There wasn’t enough demand for labor.  The labor market was “broken,” it explained. What was needed was to create a demand for jobs.

At least they never went as far as to suggest what Nancy Pelosi adventured: that unemployment insurance was itself a form of employment.

Talking to reporters, the House speaker was defending a jobless benefits extension against those who say it gives recipients little incentive to work. By her reasoning, those checks are helping give somebody a job.

“It injects demand into the economy,” Pelosi said, arguing that when families have money to spend it keeps the economy churning. “It creates jobs faster than almost any other initiative you can name.”

Pelosi said the aid has the “double benefit” of helping those who lost their jobs and acting as a “job creator” on the side.

Wow! It’s that simple. In answer to the question of where the money was going to come from, the answer was equally plain. The government would just increase the budget — from debt, it’s true — and all would be well.

The same solution has been advanced to cover the defects of Obamacare.  Its solution to insuring the uninsurable has been to expand Medicaid.  This was part of the strategy from the start. In National Federation of Independent Business v. Sebelius, the Supreme Court, in upholding the constitutionality of the individual mandate, also conceded the Feds could not compel the states to do things which in their judgement they could not afford.

The Supreme Court, in an opinion written by Chief Justice Roberts, upheld by a vote of 5 to 4 the individual mandate to buy health insurance as a constitutional exercise of Congress’s taxing power. A majority of the justices, including Chief Justice Roberts, agreed that the individual mandate was not a proper use of Congress’s Commerce Clause or Necessary and Proper Clause powers, though they did not join in a single opinion. A majority of the justices also agreed that another challenged provision of the Act, a significant expansion of Medicaid, was not a valid exercise of Congress’s spending power, as it would coerce states to either accept the expansion or risk losing existing Medicaid funding.

This is inconvenient, since Obamacare is doomed without Medicaid expansion. Unable to attract the Young Invincibles into its insurance pool, the new talking point for its advocates is that any state which doesn’t expand to align itself with Obamacare is guilty of mass murder. The Huffington Post writes:

27,000 May Die Next Year Because Republican Governors, Lawmakers Refuse to Expand Medicaid … A majority of Republican governors and state legislators, driven by relentless political opposition to the Affordable Care Act (ACA), have rejected billions in federal funding, denied millions needed health care and consigned thousands to premature death by refusing to extend Medicaid to their own residents.

Note the phrase “rejected billions in federal funding, denied millions needed health care and consigned thousands to premature death.” They’ve rejected all that free money! How stupid. Why didn’t they just take it? Yet Medicaid itself is bankrupt. Forbes noted in the middle of this year that:

The most obvious argument against Medicaid expansion is Medicaid itself. Decades of academic research point to the program’s poor track record of helping the working poor. Whether it’s Medicaid patients’ higher chances of re-occurrence for many types of cancer, their higher in-hospital mortality rates for strokes, heart attacks, and pneumonia, or their limited-and sometimes non-existent-options for many medical procedures, Medicaid has proven itself incapable of giving patients the care that they deserve-and too often, the care that they desperately need. Indeed, one in three doctors won’t take Medicaid patients, illustrating the difference between a government-provided insurance card, and actual health care.

Obamacare, you will recall, was supposed to save America from the bankruptcy of Medicaid. Now Medicaid is supposed to save Obamacare from the bankruptcy of Obamacare.

It turns out there isn’t unlimited free money. The Murray-Ryan budget deal axed extensions to unemployment insurance precisely to reduce the deficit and restore cuts to national defense.

The budget deal hashed out by congressional negotiators will pass the House on Thursday with the majority of Republicans supporting it, according to GOP leadership aides, although House Democrats have threatened a revolt over unemployment benefits.

Despite raising the level of discretionary spending over the next two years and replacing $63 billion in scheduled automatic cuts from the so-called sequester, House Republicans are largely supportive of the agreement reached by Rep. Paul Ryan (R-Wisc.) and Sen. Patty Murray (D-Wash.). It protects military spending, allows Congress to return to the regular congressional appropriations process, and reduces the deficit by roughly $85 billion over 10 years without raising taxes. There is also, of course, a political imperative.

Why was it necessary to reach a deal at all? Why not just abolish the debt ceiling and give President Obama carte blanche to run up America’s credit card?

Some actually believe that’s the way to go. With the year ending, there is an understandable outcry over the non-extension of unemployment benefits into the next. Some have warned — with good reason — that they’ll be rendered homeless. The Democrats have said the solution is obvious: extend the program by raising the deficit, which is exactly what the Murray-Ryan agreement was supposed to prevent.

Suppose it is the lack of money that is the root of all evil.  Then there is a very real danger that millions of Americans will enter 2014 with neither insurance nor unemployment benefits. Why? Because there isn’t enough money for everything. Something has got to give. The Democratic solution in each case has been, why not cover the gap with “free government money”?

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Top Rated Comments   
When a Vegas gambler is on a wild losing street, there is a condition that occurs to many, called "steaming".

Chasing with good money after bad on steroids.

Cloward-Piven leftism and Krugman's Communist front economic madness adds a spice to the menace of insanity and evil.

They WANT to overload the system to make it collapse faster. There is not one thing being done by this evil, lying cabal that improves free market democracy. Not one thing.

They don't wish to pump money into Wall Street, they wish to occupy it and pump sarin gas into it.

If they can get a few non-leftists to talk ignorantly about "the banks", the "insurance companies", the "fat cats on Wall Street"....all the better.

Spending to break the bank...breaking an entire country's bank...by stealth and propaganda...hiding as compassionate liberals and stealing money through confiscation, spying and ruining business by oppressive regulation...strangflation...is so deeply into the world's economy...they only have one domino to topple.

Krugman should hang for treason.
16 weeks ago
16 weeks ago Link To Comment
"27,000 May Die Next Year Because Republican Governors, Lawmakers Refuse to..."
Equals
"If You Don't Buy This Magazine, We'll Kill This Dog"
16 weeks ago
16 weeks ago Link To Comment
Iron Laws of Economics:
1. A given dollar can only be spent once.
2. If a dollar is spent for item A, by definition, that same dollar cannot be spent for item B.
3. Dollars, like all currencies, must represent work and value to have meaning.
4. If you borrow a dollar, sooner or later you must pay that dollar back. Debt is not an asset. Debt is a liability.
5. Spending that cannot be sustained - will not be sustained.
6. Debt that cannot be payed - will not be paid.
7. Government programs that cannot continue - will not continue.

If you want to see the future of Democratic spending, look at Detroit.

If you want to see the long term future of the US under democratic spending, see Mexico, Argentina, etc;.

At some point, the US will no longer be able to pay debt by printing dollars. At some point, and according to the Congressional Budget Offfice that will be no later than 2027 or so, debt, interest on debt, and spending will be so out of control the economy will implode.

So what will happen? Well, my guess is that President Hillary or whoever will succeed her will confiscate as much wealth as possible (dont get too attached to your 401k's, if you have them). When that money runs out more printing will be done and no doubt we will hear about how inflation of 5-10% is actually good for the economy.

And when that runs out, expect the federal government to quietly raise the retirement age to 75,and expect Obamacares Death Panels to start cutting costs by denying care. You will find you do not have a legally enforceable right to the health care you think you bought. Nor do you have a right to social security (that is already settled law). What happens after that I leave to your imagination. The democrats and liberals have bought elections and will continue to do so, therefore I do not expect anything to change - until it is too late.
16 weeks ago
16 weeks ago Link To Comment
All Comments   (65)
All Comments   (65)
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The closest historical example of what we are experiencing is what happened after WWII. Contrary to popular belief, the bond drives didn't raise the money needed for the war. The Fed bought the bonds off the banks with newly printed dollars. The money supply grew to enormous proportions.

What followed were spurts of growth which was accompanied by high inflation rates (high considering we were supposed to be on a gold standard). Then the economy would fall back into recession. We had recessions in 1949, 1953, 1956, 1957, 1958, and 1960. In 1958, the economy contracted 10% in the first quarter.

The federal government soft-defaulted. First by refusing to back the currency with silver (silver certificates). Later, President Johnson ordered the removal of silver from the coinage, created the infamous 'Johnson Slugs'.

The saving grace that got us out of the hole were the Kennedy tax cuts and the fact that we had a growing population. Plus, with Europe and Asia still recovering from damage from WWII, we were the only game in town for major manufactured goods. We grew and exported our way out.

Now we have massive amount of dollars sitting at the Fed. We can default or grow out of it (or a combination of both if that is possible). However, we don't have the population growth (functionally illiterate immigrants from cultures hostile to ours do not count.. they are a net drain on us), so what else can we do?

Assuming by some miracle we get government spending under control, starting with at least a 40% reduction in discretionary spending and reign in entitlements (raise the retirement age to 72.. now), we will have to institute policies that lead to massive gains in growth and productivity. That growth will only come if the taxes and regulations that hold back innovations are eliminated.
16 weeks ago
16 weeks ago Link To Comment
At some point, the US will no longer be able to pay debt by printing dollars. At some point, and according to the Congressional Budget Offfice that will be no later than 2027 or so, debt, interest on debt, and spending will be so out of control the economy will implode.

So what will happen?
.........................
One bad thing about the oil fracking boom that I've been studying closely is that a mountainous wall of cash is headed the way of the USA. It is so deep and so strong and so powerful that it will restore the financial part of the what Richard has called the "margin". Maybe there was another word. In any case you have to call off the financial part of the apocalypse for now. The price of Gold, the apocalypse money is collapsing. The rest of the grinding crushing bad stuff is still on track.
16 weeks ago
16 weeks ago Link To Comment
The mint stamps out a few trillion dollar coins.
16 weeks ago
16 weeks ago Link To Comment
I spoke to a Keynesian economist the other day and asked why he thought people were moving away from the economics of borrowing money to pay back borrowed money, and he indignantly replied,

When things go good no one complains
When things are good it’s hurrah Keynes
But come a little bump or glitch
And folks begin to grump and bi*ch
Borrowing’s the way to go
It pumps things up when things go slow
It creates jobs where there were none
And let me tell you we’re not done
A trillion here a trillion there
It doesn’t matter, who should care
It’s only paper, print some more
When ink runs out run to the store
The printing press will save us all
When stocks go up just put and call
No one can lose, it’s all a game
If things go wrong
Then you’re to blame
There lived no greater man than Keynes
For after ruin comes the gains

16 weeks ago
16 weeks ago Link To Comment
And when the presses can't keep up, there's the Fed's answer to Bitcoin. Or the implanted microchip, I hear a lot about that too......'>........
16 weeks ago
16 weeks ago Link To Comment
"America is broke and everyone is in trouble."

FIFY Wretchard. We are already the brokest country in the history of the world...unless we want to start selling off real estate and other hard assets.
16 weeks ago
16 weeks ago Link To Comment
Why do people in this country not understand the US is worse of than Greece? "It can't happen here? Syndrome" is my best guess. Oceans will not help against the financial problems we are about to face.
16 weeks ago
16 weeks ago Link To Comment
There's also that bit of real estate you're sitting on right now, but the vast majority of us are more than reluctant to time share that.....;D.........
16 weeks ago
16 weeks ago Link To Comment
Get your slask in order. The best advice for humanity. Saved billions of lives -- when we put our slask in order we eliminate epidemics due to poor sanitation. The development of water and sewer systems was a necessity to advance to the next level of human culture. Civilization depends on it.

Government handouts -- and that includes pensions and most disability payments -- do not organize slask, they encourage it to continue being slask.

Private charity almost always forces some kind of organization upon the slask. This is not to say that humans are ever slask, put it is a part of us, we do get caught in it, and we have to handle it properly. Being out of work, being disabled, being elderly, being a orphan, a widow, a divorcee, a single mom --- all ways of being that are more slasky than other ways of being.

Hand outs by bureaucrats keep folks deep in it.

(Slask is the Swedish term)
16 weeks ago
16 weeks ago Link To Comment
what's a slask and what is Swedish?
Why do people assume common knowledge and heritage anymore?
16 weeks ago
16 weeks ago Link To Comment
When a Vegas gambler is on a wild losing street, there is a condition that occurs to many, called "steaming".

Chasing with good money after bad on steroids.

Cloward-Piven leftism and Krugman's Communist front economic madness adds a spice to the menace of insanity and evil.

They WANT to overload the system to make it collapse faster. There is not one thing being done by this evil, lying cabal that improves free market democracy. Not one thing.

They don't wish to pump money into Wall Street, they wish to occupy it and pump sarin gas into it.

If they can get a few non-leftists to talk ignorantly about "the banks", the "insurance companies", the "fat cats on Wall Street"....all the better.

Spending to break the bank...breaking an entire country's bank...by stealth and propaganda...hiding as compassionate liberals and stealing money through confiscation, spying and ruining business by oppressive regulation...strangflation...is so deeply into the world's economy...they only have one domino to topple.

Krugman should hang for treason.
16 weeks ago
16 weeks ago Link To Comment
It's 'losing streak' not 'losing street'.
15 weeks ago
15 weeks ago Link To Comment
The Leftist impulse to raise the minimum wage at every turn has a sister impulse to destroy the efficacy of the free market and those of the producer class.

America's standard of living has been falling for at least four decades, but at an accelerated pace since 2009 because whenever it can the Left makes the production of goods and services much more expensive than they ought to be.
Unnecessary, punitive and crony favorable legislation and regulation is the real reason why it is so much more costly to live now than in times past, and it's only going to get worse with Obamacare et al.- much worse.

The remedy to the falling standard of living is not a higher minimum wage, but to unleash the power of the free market and the creative imagination of the American people. Yank off the shackles of all this ridiculous regulation, and you'll see the economy take off like a rocket and the standard of living along with it.
16 weeks ago
16 weeks ago Link To Comment
It used to be that if you didn't work, you starved—unless you had a really good reason for not working (sickness, injury, etc.) that made your family and friends take pity on you. If you thought your wages were too low, you either put forth more effort in hopes of a raise or looked for a better job. You also kept debts minimal and manageable and saved enough to cover mishaps, lay-offs, and such. These principles still work to get you ahead regardless if minimum wage is $3.00, $7.25, or $15.
16 weeks ago
16 weeks ago Link To Comment
How many were required to read B.F. Skinner's "Waldon Two"?

Written post WWII I bet every lib has read it. And believes it. And believes that are the deciders, of all.

Skinner, later, recognized his error.
16 weeks ago
16 weeks ago Link To Comment
So the Planners, using their free will, reject the free will of Everyone Else? Pretty hilarious, and it sure does explain a lot of what they think and say and do.
16 weeks ago
16 weeks ago Link To Comment
Most of the radicals and communists I knew in college in the '60s were RABID behaviorists. There was even a play on "The Lord's Prayer" that began with:
B. F. Skinner who art at Harvard/
Hallowed be thy box.

For them Skinner's behaviorism was all about controlling people and groups and fit right into their leftist ideology. And, of course, we all had to read "Walden Two" and compare and contrast to Thoreau's "Walden." This was at a small school in rural Georgia; can't imagine what the indoctrination would have been like in the big openly lefty schools like the Ivies or the CA System.
16 weeks ago
16 weeks ago Link To Comment
"27,000 May Die Next Year Because Republican Governors, Lawmakers Refuse to Expand Medicaid"

Hey......This is simple to solve. Buy 27,000 bus tickets and send them to states that do have Medicaid!!
16 weeks ago
16 weeks ago Link To Comment
The economies of the West and in particular America have been in trouble since the early 1930's, perhaps even the last couple of years of the 1920's. Several factors contributed to this.

The "passing of the torch" by the U.K. to the U.S. happened at a time when the U.S. was centralizing banking and taxing productivity instead of use and commerce. At the same time the U.S. was undergoing a major and rapid change from labor intensive agriculture to capital intensive agriculture during a prolonged drought period. With the exception of the last truly conservative and great president - Coolidge - presidents were increasingly prone to be collectivist in their basic philosophy and centralizing in their vision for political power. The result of this early "progressive" push was, of course, the Great Depression 1.0.

Depression 1.0 was marked primarily by Keynesian and other collectivist, socialist changes to politics and government that were in the process of creating ever greater misery and distance between the extremely wealthy and everyone else (despite what Democrats claim - look it up) when manna from heaven happened to pull the left's chestnuts out of the fire - war orders from Western Europe and China. The first "next new thing".

Going forward, we had another "next new thing", the biggest one of all, rebuilding the world after WWII when we had the only intact industrial base and workers capable of manning it. This continued to mask the failures of Keynesian policies that were ongoing.

By the 1970's other countries had ramped up their industry and energy development moved to other places which restricted our cheap oil. No "next new thing" happened for a long time, so we had steep decline. The Reagan defense buildup, while absolutely necessary, made things appear to be great, but it continued the public sector gravy train, and did not address the basic problems which led to Depression 1.0 in the first place.

We were all set for collapse in the 1990's when a "next new thing" appeared out of nowhere. Small powerful computers, the software and devices to run them and the efficiencies they provided for robotics and offices brought huge money into the U.S. at a time of the greatest tax hike in our history. (I often wonder how much better the '90's would have been without the Clinton tax hikes, which Democrats wrongly say created the wealth because of 'pump priming and job training' or some such nonesense). For a couple years things appeared good simply because of the influx of money, but the economic and governmental infrastructure were merely being covered with bandaids.

The next "next new thing" was a contrived one, the real estate boom that was fueled by government attempting to buy everyone a house even if they couldn't afford to pay for one or maintain one. Bust in 2007. Followed by Depression 2.0. Followed by the current regime's attempts to create a "next new thing" with taxes on fossil fuel trades or "green" energy. Both epic failures.

The truth of the matter is that right now we are in a plateau phase which occurs from time to time in history. There is NO "next new thing" to rescue the left's Keynesian fantasies and crappy little narrative about the superiority of collectivism, centralisation of government and economic planning, and outcome egalitarianism in the realm of material wealth. Throughout the past ninety years, with one exception, we have had presidents and congresses which subscribed to these notions - what Mead and other have called the "Blue State Model" - to one extent or another. Because there is no longer an "next new thing" to rescue it currently and unlikely to be one at any time in the near or medium future, the reckoning is, unfortunately, occurring NOW. They had a long string. But it's over. How it will finally die will not be pretty, but the level of ugliness could be anyting from slight to civilization ending.

Interesting times, and all that.
16 weeks ago
16 weeks ago Link To Comment
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