Austered The Wrong Way
By Mitch Berg
To: National Public Radio News
From: Mitch Berg, uppity peasant
Re: Terminology
Dear NPR:
Over the weekend, while listening to one of your news programs, I caught a story about skilled workers emigrating from Portugal.
Your story announced that the Portuguese economy was “recovering from austerity”
Austerity was not the problem. Or, rather, austerity was, at most, a symptom; The disease was unsustainable government spending, that sapped the vitality of the private sector economy.
Unrestrained spending on things like lavish pensions, cradle to grave welfare, a government workforce that displaces private enterprise, and yes, public broadcasting, committed governments to endless, crippling spending that, when the economy goes south, cannot be sustained.
See that we don’t make this mistake again, shall we?
That is all.
July 29th, 2015 at 9:13 am
OH, come on–you know that a dollar spent by the government always does more work than a dollar in the private sector, even though it’s being stored in the same banks, goes through the same hands, buys the same commodities, and hires the same people to do the work. The Keynesians told me, it must be true!
July 29th, 2015 at 10:03 am
Whatever Obama and his economic gurus are promoting, it’s not Keynesian economics.
The keynesian equation for GDP is Y = C + I + G + (X-M) = GDP. C is consumer spending. I is investment. G is government spending. (X-M) is exports minus imports.
Keynes showed that both C and I had a multiplier greater than 1. This is because people invest money to get a return greater than 1.0, while consumer spending is voluntary. People who spend $1000 for new fridge do so because they will receive more value for that $1000 than they will get by investing $1000.
Government spending, according to Keynes, has no multiplier. This is because the government does not spend money to get a monetary return. Indeed, there is a good argument that spending money w/o expectation of a return is the purpose of government.
The way a keynesian stimulus is supposed to work is that it has to be borrowed money. If it’s tax dollars you are spending, you are simply taking money that would otherwise be spent on consumer goods or investments. It also has to be money spent by consumers, e.g., a proper keynesian stimulus is money borrowed by the government, and transferred to the people who spend it on consumer goods or investments (which have multipliers > 1.0). In other words, a tax cut, paid for with borrowed money rather than government spending cuts, is as much of a keynesian stimulus as deficit spending.
The current posse in DC doesn’t want to do a tax cut because, although the stimulus effect may be the same as deficit government spending, the money ends up in the wrong pockets, as far as the redistributionists are concerned. Cutting taxes does not allow them to play at Robin Hood and collect votes.
July 29th, 2015 at 1:22 pm
OK, so liberals are stupider than Keynesians. Got it.
July 29th, 2015 at 6:51 pm
Bikebubba-
The keynesian GDP equation is so brutal that for many decades statists have been trying to get around it by proposing alternative measures to GDP to measure the wealth and productive capacity of an economy. One alternative measure is the Human Development Index (HDI). The HDI measures a variety of social indicators, weights them, and comes up with a number. Social indicators measured and given weight by the HDI are things like access to healthcare and education parity between men and women.
The reason bureaucrats love the HDI (and everyone else hates it) is because it allows the government to impose values on a nation and then pronounce that all is well when their goals are met. A country like Cuba, with a crappy economy, massive poverty, crumbling infrastructure, and with people literally dying to escape could have a very high HDI.