Keynes and Obama

In my last post I argued that Reagan and Bush were Keynesians whether they admit it or not.

Barack Obama on the other hand probably would not shy away from the Keynesian label. Obama's $900 billion stimulus, designed to get us out of the Great Recession, is right out of the Keynesian playbook.

With unemployment still hovering around 9.7% many in this country are not convinced that his policies have worked.

Just today quarter one GDP numbers came out and they were good but not great. The Bureau of Labor Statistics stated that the economy grew 3.2% . This number would be great under normal circumstances but these are not normal times. The country really needs to experience growth in the 5 to 6% range to fully recover from the past two years.

But we should be thankful that even the modest recovery we are experiencing was made possible by Obama's stimulus and the economic theories of Keynes.

Democrats and Republicans will argue this point but I would rather look at independent analysts that are paid to create accurate data for clients instead of listening to partisan spin doctors.

The following graph shows the estimates from three different Wall Street analysts on what the economy has done with the stimulus and what it would have done without.

It seems clear that doing nothing would have been disastrous. Ultimately though the American people will render their judgment over the next several elections.

Keynesians in disguise

For the past one hundred years the central economic debate between Republicans and Democrats has revolved around how much the government should tax and spend. Democrats embrace the philosophy of John Maynard Keynes who believes that the government should spend more during recessions, even if it incurs deficits, in order to protect citizens from the spasms of capitalism's creative destruction by providing them with a more robust social safety net. Republicans have embraced the philosophies of Milton Friedman and Supply-Side economists who posit taxes and spending should be cut in order to stimulate economic growth which benefits us all (ie. trickle down economics or "a rising tide lifts all boats.")

This debate usually begins with an argument about the New Deal. Liberal Keynesians will argue the New Deal saved us from the Great Depression. Conservative argue that the New Deal retarded our recovery from the Great Depression and it was only the massive energy released by our entry in to World War II that snapped the Depression's stranglehold on the country's economy. I used to ponder these competing theories and wish I was an undergrad again so I could ask an economics professor. However my question today would be different.

Could our massive military spending during World War II be considered just another type of Keynesian stimulus? Military spending is as much a form of government spending as welfare or jobs programs. Could both the New Deal and military spending for World War II vindicate Keynes's theories?

I think the answer to these questions is most likely yes. And I would add that there is additional evidence to support Keynesian from the most surprising of sources: Ronald Reagan and George W. Bush.

These two supposed fiscal conservatives, while touting imaginary fiscal restraint, actually appear to have embraced Keynes by massively expanding government spending. Spending that happened to be military in nature much like our fiscal policy of the 1940's.

Here are two graphs to illustrate this point.

Notice the two points when debt started to increase exponentially.

But gross debt only tells half the story. Even more striking is how much our debt has exploded over time relative to how much our nation's income, GDP, grew over that same period.

This graph begs the question which Presidents have pursued spending policies beyond our means?

So any claims about Reagan or Bush's economic successes have to be tempered with how they were achieved. It seems likely that they artificially stimulated the economy with deficit spending.

John Maynard Keynes would be proud.

Are you Plato's Freed Man?

A common refrain from voters is they want a politician who isn't a slave to "the polls." Bill Clinton was the most notorious for this behavior as he once famously polled where his family should go on vacation. (I think they went horseback riding out west somewhere?)

And finally along came George W. Bush who used to boast often and loudly that he didn't pay much attention to the polls. And you know what I sort of believe him. Not surprisingly that strategy led Bush to the lowest approval ratings of any modern president since Nixon.

But then again I'm glad Obama ignored the polls on health care and pushed a bill through even in the dark days after the Scott Brown fiasco. So I'm not really concerned with whether politicians follow the polls. Sometimes I'm OK with it and sometimes I'm not.

What I'm most interested in is what do people really mean when they say they don't want a politician who follows the polls? My suspicion is that everybody assumes they have all the answers to the nation's ills and the only thing preventing politicians from doing what is necessary is that elected officials are slaves to the mob. If we could peer in to people's minds I bet many of them are screaming, "Why won't they listen to me?" In everyone's mind they are the Freed Man from Plato's Allegory of the Cave. Destined to speak the truth to the masses only to be killed for it.

But if my suspicions are right the paradox is that a majority of the country perceives itself as possessing the truth and yet think they are in the minority. So someone must be deluding themselves.

I will point to one rather striking example of how a most Americans say one thing and then immediately proceed to contradict themselves. Almost everyone says they want to tackle the deficit and get the budget back in order. But if you look at the graph below you will see most Americans support cutting almost nothing. And the programs they are willing to cut (ie. foreign aid) are so miniscule as to be practically meaningless.

Andrew and Me

It isn't a big secret that I admire many of the bloggers and journalists whose links you see to the right of these posts. Serendipitously as I start this blog one of my favorite, and most popular bloggers in the United States, Andrew Sullivan, posted and responded to an email I sent him several days ago.

Here is the exchange. My response to his response follows:

Dissent Of The Day - The Daily Dish | By Andrew Sullivan



Dissent Of The Day

29 Apr 2010 04:32 pm

A reader writes:

I've been fascinated with your vigorous defense of Obama and your disdain for the Labour Party. Within the span of several posts you dismiss the likelihood of a GOP sweep in November because they have awakened Hispanics with all their bigoted blundering around the immigration issue. Simultaneously you seem to be relishing in Brown's demise because he's caught calling a women a bigot for saying "You can't say anything about the immigrants."

Are you sympathetic with the issues of Hispanics here in America, or are you simply pleased that they are going to help hold back the bigoted waves of white rural America? Is this woman a bigot, as Brown asserts, or is she, unlike her Tea Party counterparts, expressing legitimate political anxiety?

Andrew's response:

I have not dismissed the likelihood of a GOP sweep in November. The anti-incumbent mood and the depressed job market suggests a robust swing to the GOP. What I have said is that the long-term branding of the party with the Arizona law is a terrible development for the GOP in the future, when minorities will become a larger and larger part of American society and politics. I do believe we should have a more honest debate about illegal and legal immigration.

More, I favor tougher measures to secure the border. I also favor easier ways for talented immigrants to come here legally. As an immigrant myself, I do sympathize with legal Hispanics who have gone through the legal channels for immigration and will now have to carry around extensive documentation to prove they are not criminals. This bill will thereby punish "suspicious"-looking legal immigrants as well, because they will all feel under surveillance. A society where one minority feels under surveillance is not a truly free society. This is beneath America, in my view.

As for Mrs Duffy, she was not speaking of illegal immigrants. East Europeans have every right to work and live in other EU countries. As for Labour, I find their fiscal record as damning - almost as damning as George Bush's. They really are socialists. And I'm not one. I hope Brown destroys that party and allows a liberal response to conservatism to be the two-party system.

My response:

I am sympathetic with many of Andrew's sentiments but he hasn't answered my central question. I am embarrassed that I didn't even realize she was complaining about legal immigrants which I think makes my question even more pertinent.

Is Mrs. Duffy a bigot?

If the answer is yes then should we really be stringing up Brown in effigy if he was expressing a politically disastrous but accurate observation? Andrew is free to criticize Brown all he wants for his socialist orientation but does he want to utilize base opportunism to bring about such demise? Can't Britons simply vote Brown out because they dislike Labour's policies?

I think Andrew has made it clear on his blog, and I agree, that the right and the tea partiers are constantly manufacturing outrage towards Obama by playing to the worst aspects of our nature, ie. the Jeremiah Wright brouhaha or the ACORN pseudo scandal. Is this any different?

Anyways, I'll just enjoy the moment now.

War is Peace

I asserted in my George Will post that politicians on the right are no longer arguing in good faith and are simply focused on accumulating power. The best current illustration of this phenomenon is Senate Republicans attempting to characterize the financial regulation bill before Congress as a "continuous Wall Street bailout." Many people are puzzled by this line of attack because Wall Street is aggressively lobbying against the bill. Why would Wall Street lobby against a bill that guarantees it unlimited and never ending bailouts?

The answer is simple: Republicans are lying.

The root of this lie can be traced back to the Republican's wizard behind the curtain: Frank Luntz. (Below is a New Yorker profile on Luntz.)


The Word Lab -

I first noticed Frank Luntz when I saw him in a Frontline documentary "The Persuaders" which I show to my economics students during our consumers and marketing unit. Here he proudly describes his ability to change public opinion by changing words. Perhaps the most famous example is his efforts to change the phrase estate tax to death tax. He muses about how one could get a majority of the public to support a tax cut that only affects two percent of the population? Estate sounds rich and foreign, but everyone know about death.

Genius!

...and evil.

Here is the excerpt from the documentary (Clip begins at 2:18):



Now Luntz's memo to Republicans is advising them on how to defend Wall Street while appearing to be on the side of Main Street.

So to recap:

Estate Tax=Death Tax
Global Warming=Climate Change
Tax Cuts=Tax Relief
Financial Regulation Reform=Wall Street Bailout

Frank Luntz and the Republicans=Liars

I guess Al Franken was on to something.

Dave Matthews Not That Into Himself Anymore

As a high school teacher I often succumb to getting on the soap box and giving a lot of advice. Most of the advice revolves around attempts to help my students avoid the mistakes I made as a high school student and help them avoid wasting time and energy on things that don't matter. It seems unavoidable that, as a teenager, one often makes decisions based on how that action will be perceived as opposed to what one really wants to do.

I used to have a phobia of being labeled. I think that is what led me initially in high school to like both the Indigo Girls and Metallica. I liked to tell people this and see the confusion on their faces. These days I switch over from watching an episode of Glee to two guys beating the snot out of each other in a UFC fight.

Now as I embrace things I like, simply because I like them, I realize my lame aspirations of being an enigmatic paradox are giving way to being a boring cliche. This is most evidenced by my love of golf. I used to love the NBA, now I can't stand watching the Celtics, but will sit on the couch for hours trying to determine why David Duval has lost his touch with the mid irons. What could be more stereotypical middle aged than a guy who is in to golf.

But now I don't fight it.

However sometimes one is embracing a stereotype without even knowing it. I used to think that my diminishing enthusiasm for The Dave Matthews Band was a unique and original feeling. Imagine my surprise when I learned that this feeling must be so commonplace and stereotypical of 30 somethings that The Onion mocked this sentiment as only The Onion can do.

Moneyquote:

"I used to be a hardcore Dave Matthews fan," said Matthews on the porch of his Virginia home. "I had all my records and posters. I was so blown away by everything I did—especially my live performances. I remember me and my buddies used to drive for hours just to go to one of our shows."

"Me and my band are still okay, but I feel like I've grown out of us," Matthews said. "Back when I was in the college charts, we were about all I listened to, but I guess I'm at the point in my life where my music just doesn't speak to me."

Dave, that makes two of us. Well actually millions of us.

My dying admiration for George Will

I used to be someone who assumed people on the right were arguing in good faith. Over the past several years, and particularly with the election of Obama, I've come to the conclusion that most on the right are cynical bullies with two goals: the acquisition of power and utilization of said power for their own enrichment.

George Will was one of those conservatives I admired, even if I didn't agree with him often. As a history teacher I am easily seduced by connections of relatively obscure U.S. history events such as the Teapot Dome Scandal to modern politics. George Will is the king of such anecdotes and I admired him for it. One of my favorite activities for my AP US Government students is showing them ABC's "This Week" roundtable discussion every Monday. Students inevitably love Will's dry wit and knowledge of U.S. history and it's relevance to current events.

But as the right and the Republican Party has entered the "we are absolute nutters" status people like Will are showing their true selves and it isn't pretty. Over the past year or so:

• Will has attempted to use research by scientists to deny the existence of global warming even when those scientists claim this research shows the exact opposite.

• Bemoan the ubiquotousness of blue jeans as a sign of America's cultural decline. Is he trying to replace Martin Landau in the Grumpy Old Men franchise?
  

• And the coup de gras of Will's fall from grace in my eyes is the bigotry that surfaces in this post courtesy of Matthew Yglesias about Arizona's new immigration law.

Moneyquote from Will's arictle:

Arizonans should not be judged disdainfully and from a distance by people whose closest contacts with Hispanics are with fine men and women who trim their lawns and put plates in front of them at restaurants.

Is this a better description of the people who are critical of this law or of George Will?

Third and final installment in the Star Wars blog post trilogy

Here is the best review I ever read about the Phantom Menace. This is from the site, Aint it Cool News, that I used to read frequently. I haven't been back to it in over ten years.

A little excerpt if you are too lazy to read the whole thing.

"DEATH TO LUCAS!!! I want him DEAD! I want his Family DEAD! I want his friends DEAD! I want Skywalker Ranch burned down to the ground so I can go up there and piss on the ashes!"

Speaking of Star Wars...

Up until last year I pretended that the new trilogy didn't exist. Now I can admit it exists only because this 70 minute review was created. This review was so cathartic that it almost makes up for the fact that the movie was created in the first place.

Enjoy!

"Luke, a Jedi?"

In case anyone is interested this is the inspiration for the title of this blog, here is the clip from Return of the Jedi. Of course it is early enough in ROTJ that it feels connected to Empire Strikes Back which we all know is the best movie of the trilogy.

Quote is at approximately 2:00.

Fox News is the "gift" that keeps on giving.

I saw this via Jonathan Chait at the New Republic.

He sums it up best when he says Fox News defies description.

Fox, the Lupus of news

Jon Stewart is a national treasure.

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