Keynes Kids

Perhaps the reason why Keynesian economics doesn’t work so well is that practitioners of Keynesian economics aren’t particularly Keynesian.

Our interpretation of at least one aspect of the Keynesian economic model is that during economic slumps, the Government will engage in huge spending programs to inject money back into the economy. That deficit spending where the government is spending more than its taking in, “deficit spending”, is offset where the government was running a surplus during the good times.

Well, the first half of that equation is easy enough, isn’t it? Who doesn’t like to spend? It’s that second part of the equation that’s just so damn difficult.
Look at the bind Hugo Chavez is in. With oil prices plummeting, Venezuela is facing 40% inflation and a rapidly shrinking budget surplus. Chavez built his economic model around the assumption that oil prices would stay high – $125/barrel – vs. the $34/barrel it is now and the populist goodwill he had built up with the masses via his soup kitchen Socialism is rapidly disintegrating as the masses don’t want to hear about global markets, the unpredictability of oil prices or any other such non-sense.

(This is in stark contrast to the State of Alaska, another petrol-state, if you will, whose governor made it a priority to “save for a rainy day” in managing the state’s oil bonanza)

So, as the train has already left the station here with our myriad of bailouts and where we will soon be embarking on a $1 trillion stimulus plan road trip, we are in decent shape because of the dot.com boom in the 90s and the strong GDP showings in the middle of this decade that has our national piggy bank bursting for this, our rainy day, right? Oooops….

This nation is currently in debt to the tune of 10 times the amount of President-elect Obama’s stimulus package (or as David Brooks of the New York Times refers to this glorified maintenance/overhaul public works program, "This Old House") with no real plan on who’s going to pay for it. But when you are talking sexy… sexy like giving the country a new coat of paint, you leave all the hum-drum and mundane questions of financing and debt to other people, like this:



So, why cast off a questionable economic theory that has only led to disastrous practical applications when your glorified deferred maintenance program becomes, in reality, a deferred responsibility program? Thanks, kids!