Keynesian Economics- The Theory behind Obama's Plan »
Posted By truthiness 10 months ago in Business & FinanceJohn Maynard Keynes, a twentieth century economist who influenced policy from FDR to Nixon, has had a resurgence in Obama. He believed that governments can stabilize economies by manipulating tax and interest rates in opposition to market trends. He stood in opposition to the Reagan-Bush doctrine of Supply side economics by suggestion that economies were demand driven.
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orndorffter10 months ago
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This is America, and I have great hope for our country,I well hold on and bare with our President because he knows whats best for us to be able to get releaf from its brocken Economics.The wefare of all Americans are in his hands. And a very smart man at that. so this is what I think but nobody else has to think as I do. I know that it wont happen over night, but it well happen,this I belive.
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protoham10 months ago
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What makes you think he is so smart?
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Nixon was probably the smartest and Carter was probably the most honest in the past 50 years, you see where that got them.
We don't need a smart president or a slick president, we need one with common sense. That can surround himself with honest and smart people. I haven't seen this happening.-
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wtagg10 months ago
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"we need one with common sense."
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Absolutely. Who? And how much common sense do you think the government can handle? Or the citizenry?
Just look at the candidates in the last election. I', sure you witnessed some of the debates, both primary and general.
Did you vote for someone with common sense?
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truthiness10 months ago
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The Keynesian model has the gov't controlling the economy by taxing and raising interest rates during boom periods to keep inflation down, and by cutting taxes (to the middle class) and lowering interest rates during bust periods to drive the economy. during especially bad periods Keynes recommends gov't deficit spending to stimulate job growth.
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Many thought the Stagflation of the Carter era killed this model because it was not predicted. However no one took into account the confluence of: Nixon removing us from real money to Fiat money, Women entering the workplace en masse (creating 2 income homes while) these factors generated a boom which cause the Keynesian response of taxes and high interest rates. Immediately followed by the Oil embargo which created inflation. Keynes would want to respond to the embargo with low taxes and deficit spending, but the market was faster than policy.
Reagan-Bush responded with a variation on Keynes, supply side economics, which required that the tax breaks and deficit spending be direct at those with the ability to generate markets instead of those to purchase from them. This failed to create the trickle down effect Reagan hoped for but did generate the S and Dot Com bubbles, as well as the housing bubble during Bush jrs reign.
Clinton practiced a more disciplined form of Keynsian economics. by making cuts in military ventures he was able to avoid heavy deficit spending and get the gov't budget under control. -
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truthiness10 months ago
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Obama has again brought Keynesian economic theory to the fore. Promising tax cuts to the middle class (the demand sector of the economy) and attempting to deficit spend so that he can put people to work in order to keep the economy thriving, which should in turn stimulate tax income to pay off his debt.
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my concern is that, historically there is a tipping point in the ratio of National debt to GDP beyond which a nation can not survive.
also, no nation in history has had to deal with a recession cause by a bubble/bust, devalued currency, and national debt all at the same time.
and the only nation to ever suffer a major recession under Fiat currency was ancient China, at which point they abandoned paper money for coins for several centuries.-
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slate10 months ago
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I wonder if the trillions of dollars that have been printed over the last few years and will continue to be printed by the current administration will so devalue the US dollar that it will make it impossible to overcome the shape we are in and only exacerbate the problem?
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truthiness10 months ago
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the thing that gets me is the inefficiency. simply nationalizing the health insurance industry would have cost less and would have provided working capital to every business in America. they would have not needed to do anything else
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birdsabound10 months ago
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I wonder how many of the "good" folks who so roundly condemn the "waste" in THIS "stimulus" package REACTED WITH ANYTHING LIKE PROPORTIONATE OUTRAGE at the waste that is implicit in the "TARP" boondoggle to "bail out" "our" FINANCIAL institutions --- which was, after all, undertaken on a DIFFERENT, supposedly more "conservative" "political watch".
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And I wonder too how many of them argued against the HUGE boondoggle undertaken over the past eight years to SUBSIDIZE THE OIL COMPANIES by means of THE HUGE CAMPAIGN TO IN EFFECT TAKE OVER THE FOURTH-LARGEST OIL RESERVES IN IRAQ! For a great many ideological idiots, the REALITY is that THEIR HYPOCRISY IS NOW SHOWING!-
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Radiofreeeuropa10 months ago
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A nationalized health insurance plan, though it will ultimately save trainloads of money will face fierce opposition in the US. Too many people have twisted ideas about it, the drug companies and particularly the insurance companies will be fighting it hard.
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truthiness10 months ago
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it's he inefficiency that gets me. i could have nationalized they health insurance industry and done nothing else for stimulus. it would have cost less and provided extra working capital to every business in America. it also would have meant more spending cash for every citizen who pays for private insurance. and it would have meant an end to costly entitlements like medicare and medicaid.
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4thchance10 months ago
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HOW MUCH IS ONE TRILLION DOLLARS???
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This will blow your mind!
The combined cost of the $350 billion dollar bank bail-outs and the $820 billion for the stimulus package, all adds up to well over one TRILLION Dollars. Lets put one trillion dollars into perspective.
How much Microsoft stock could one trillion dollars buy?
How much Google stock could one trillion dollars buy?
How much Wal-Mart stock could one trillion dollars buy?
How much Coca Cola stock could one trillion dollars buy?
How much Pepsi stock could one trillion dollars buy?
How much Apple computer stock could one trillion dollars buy?
How much McDonalds stock could one trillion dollars buy?
Do you think one trillion dollars could buy all the stock for any one of these huge companies?
Yes it could, in fact
ONE TRILLION DOLLARS COULD BUY ALL THE STOCK FOR ALL THESE HUGE COMPANIES COMBINED, AND THERE WOULD STILL BE BILLIONS OF DOLLARS LEFT OVER!!!!!!!
told ya it's a mind boggling!-
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truthiness10 months ago
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the thing that gets me is the inefficiency. simply nationalizing the health insurance industry would have cost less and would have provided working capital to every business in America. they would have not needed to do anything else
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Natureboy10 months ago
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So Obama could buy WalMart, Coca-cola, Pepsi and McDonalds and just close them?
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What an opportunity to make the world a better place!
Of course, there would be unemployment but hopefully companies would crop up to provide healthy products in a benign manner.
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4thchance10 months ago
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HOW MUCH IS ONE TRILLION DOLLARS???
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This will blow your mind!
The combined cost of the $350 billion dollar bank bail-outs and the $820 billion for the stimulus package, all adds up to well over one TRILLION Dollars. Lets put one trillion dollars into perspective.
How much Microsoft stock could one trillion dollars buy?
How much Google stock could one trillion dollars buy?
How much Wal-Mart stock could one trillion dollars buy?
How much Coca Cola stock could one trillion dollars buy?
How much Pepsi stock could one trillion dollars buy?
How much Apple computer stock could one trillion dollars buy?
How much McDonalds stock could one trillion dollars buy?
Do you think one trillion dollars could buy all the stock for any one of these huge companies?
Yes it could, in fact
ONE TRILLION DOLLARS COULD BUY ALL THE STOCK FOR ALL THESE HUGE COMPANIES COMBINED, AND THERE WOULD STILL BE BILLIONS OF DOLLARS LEFT OVER!!!!!!!
told ya it's a mind boggling! -
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4thchance10 months ago
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This a bit off topic, but if I don't post it, then most of you here at Propeller will never hear about it!
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Yet again, we have another Democrat Senator who is in trouble for TAX EVASION!!!
South Dakota Senator Tom Daschle (DEMOCRAT) has been caught for not paying his taxes, they say he evaded paying over $100,000+ in taxes! So, he simply went to the IRS and paid the back taxes. NO penalties for him!
YES THIS IS FACT BECAUSE THIS NEWS IS FROM THE NEW YORK TIMES!
http://www.nytimes.com/2009/01/31/us/politics/31da...
If this were you or I we would be in BIG trouble with the IRS, but not these senators, they are not held accountable for anything these day!
All this explains why the Democrats have no problems with raising OUR taxes, because it appears the Democrats simply don't pay any taxes! -
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canadianrancher5710 months ago
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I have never studied economics but I wonder when Mr. Keynes was developing his idea of government stabilizing the economy did he ever think that every time that there was government intervention there seemed to be a new beaurocracy formed and that those beaurocracies remained after the intervention. I don't know what theory my ideas would fall under but it seems to me that if people are not producing something that can be sold the idea of an economy that is going to survive doesn't stand a chance.
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I have seen all sorts of comments about outsourcing of jobs by major companies and although it hurts the empoyees in our countries, the companies will keep in business, these companies have realized the most important fact of business or economies, that being that one must be competative and also one must trim the excesses. Maybe I shouldn't put all the blame on government but in your country as well as mine we have alot of people who are taking home a big paycheck and producing very little. The cost of maintaining these people has become a burden on most people because of two reasons,1] since they have no production to sell we are all taxed to pay for them and 2] these people are paid at a level that has nothing to do with production and cuase increases in the cost of goods to everyone else. The average person in an effort to maintain a lifestyle has dug themselves deeper into debt with each passing year and now the point has been reached that between taxes, the cost of living, and debt, people are unable to contiue to consume or if they do it's from a foreign country. -
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orndorffter10 months ago
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You guys are letting other contole your mind, they are saying things to make you relly beleive it, and your falling right into their trap. I guess thats one way they can turn you against Obama. I'm getting of of this Post all you want to do is beleive whatever Slate and the rest tell you.
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4thchance10 months ago
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Seems to me most of the posts here are factual. Just because you refuse to beleive facts, then don't be preaching to us not to beleive anything we read here. Or, if this is all lies, then how about you show us where the TRUE FACTS are posted. Don't you dare send us to Moveon.BS either!
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dgoodii10 months ago
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Keynesian Economics---The way I see it this scheme only works as long as you are the top producer of goods period. You must remain a net exporter of goods and have a large tax base that actually produces goods, not services. The rest of the world there for pays for your overspending. Another problem has risen from are technology, everyone has access to the truth almost instantly. Therefore the market can actually begin to fix itself, government still works slow and then reverses the changes as they begin to occur. As for trying to decrease cost by nationalizing anything, has not worked anywhere tried, they may give numbers to make it look good. But tax subsides throw all calculations out, not free market anymore no way to determine cost of true business.
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hefaa1Comment removed: Hard Banned
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quackpot10 months ago
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Teachers are people that earn wages, buy goods and pay taxes. Teacher jobs are currently VERY precarious due to the falling state and local budgets. Keeping teachers employed provides an IMMEDIATE stimulus to the economy in addition to the benefits that will help the children that will be called upon to pay the bill for all of this.
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Since it is the current children and their children that will need to pay the bill for this, isn't it only fair that at least some of the money go to help them acquire the skills that they will need to be able to pay? -
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buckncindykill10 months ago
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Someone 'splain something to me: How on God's green Earth is investment in education supposed to stimulate the economy? Even if you wait a generation for that education to pay off .. these people will have been educated in government schools. So that doesn't seem too promising. But part of Obama's stimulus speech was that he wants to "equip tens of thousands of schools, community colleges, and public universities with 21st century classrooms, labs, and libraries." He also wants new computers and new training for teachers. And just how does THAT stimulate our economy? Answer: It doesn't. It stimulates teachers and their unions. Stimulation you pay for under the guise of economic stimulation.
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hefaa1Comment removed: Hard Banned
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orndorffter10 months ago
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4thchance, No I'm not going to send you anywhere, you of all people I should of know better. Dont worrie I wont say anything when I see someone tring to feed you a line of BS. But you can't say I didn't try to stop it. you got your own mind and you dont need my help so I'll leave it at that. you belive what you want to your a big boy, why shoud I even try to make you understand, and all the others , I guess because I like yous and I know when certian people say things so that soon enough you would start beliving it, so now you have nothing to worrie about I wont say anything when I see whats happing you'v also had my support and and I guess I was just looking afters yous, but you have made it clear enough to me. Now they can tell you guys what ever they want and I wont say a word.
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4thchance10 months ago
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hey orndorffter,
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don't take it so personally. In general I don't pay any attention to posters usernames here. I just respond to what ever post that grabs my attention. I should have read your post more carefully, perhaps I ran the wrong way with it. I apologize to you :-)
have a great Super Bowl Sunday! -
Global_WarmerComment removed: Abusive
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Radiofreeeuropa10 months ago
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I heard enough untrue and misinformed opinions based on very little knowledge of modern economics for today thankyou.
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All I see here is a display of ignorance.
A complete lack of any concept of the Keynesian cross.
The fact is that there is still a work force, there is still a need for goods, and business would still like to make a profit.
So if private industry can't or won't make the wheels turn then public industry should until private industry can step up.
It's not difficult. Deficit spending is a tool that if used to
increase GNP pays for itself many times over. The problem is it was done during times of prosperity. Which is when you should be paying it off not increasing it. The ludicrous notion that it hasn't worked has been demonstrated to be false
on far too many threads to bother again. All criticism of the new deal focus on 1937, when the recovery dipped into recession and unemployment shot up. What happened in '37? Roosevelt caved to congressional republican's criticism that he needed to cut spending. The economy lapsed right back into the toilet. No one disagrees that WWII ended the Depression, but it wasn't because of fighting, it was because Roosevelt pulled all the stops out on Keynesian spending. Economically that is what WWII was. A massive government employment program.
And why does it work?
Because the economy grows, as it grows the money invested to make it grow becomes a much smaller fragment of GNP. After many years it's almost insignificant.
The United States has had public debt since its inception. Debts incurred during the American Revolutionary War and under the Articles of Confederation led to the first yearly reported value of $75,463,476.52 on January 1, 1791. The entire cost of the New Deal,and every war from the revolution through WWI came to $43 billion in 1940. Can you see how that is chump change in terms of today's monetary values (well a year ago, maybe not today)? Why? because we bet on our children's future, we bet that the economy will grow not falter or be looted as it was recently.
Some complained about the space program back in the 1960's being a waste of money, (had there not been the threat of the USSR doing it first not a single republican would have voted for funding it). But that "investment" led directly to virtually every dime made in technology -PCs, communications, manufacturing etc. dwarfing the investment.
Yet in 1963 who could have seen that?
You are in 1963 now, it's time to make the investment in America again. It IS that simple.-
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truthiness10 months ago
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nothing in economics is simple.
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I agree, generally, with your assessment of keynesian theory.
it is also true that there is a tipping point in the ratio of debt to GDP beyond which a nation cannot recover (i.e. USSR, the Weimar Republic, the 80's Mexico bailout) .. I am hoping that Obama can turn this situation around before we reach that point, but I fear that the combination of his application of Keynes and the resulting debt of Supply-side economics (that you so apply critiqued) may be too much.
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truthiness10 months ago
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I have to say I am a little confused by orndorffter and others thinking I posted this for the purpose of slamming Obama. The purpose was to inform people of the policies being utilized in their nation by their government, so that they could understand and form educated opinions.
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it is reasonable, and right, to critique your government. even if you are hopeful they will succeed at their plans. asking questions and critiquing helps to give one a fuller understanding of a subject, which helps you to participate in that situation in a meaningful way instead of just being subject to the tides of fate.
it is equally as bad an idea to for the left to blindly support Obama as it was for the right to blindly support Bush. an unchallenged leader will become corrupt.
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