The economic bailout package of the Bush-Obama presidencies is pure Keynesian economics. Yet no one calls it that since the Laffer Curve simplistic macroeconomic nonsense of the Reagan Era which postulated tax cuts ALONE stimulate economic activity and greater revenues. John Maynard Keynes was the true architect of the New Deal, rarely mentioned by historians including the fraudulent, plagiarising, corrupt, faux historian Doris Kearns Goodwin. The British Cambridge-educated economist wrote the seminal General Theroy of Employment, Interest and Money in 1936 which is probably the single most important book in economics since Marx’s Das Kapital.
Only in post-Reagan America would there be fear of describing the great Democratic Socialist’s economic strategy of governmental activism for what it is: The roadmap of the current order. Keynes attempted to put finality on the discredited classical, Smithian world of economic laissez-faire capitalism. Yet he did not wish to eliminate the market, but to manage it. “Market” refers to private economic activity of suppliers, producers and consumers like you and me. Keynes believed that governments must play a pivotal role in transforming market capitalism by regulating and indeed subsituting government capital for private capital in times of economic stagnation.
Keynes believed three major fiscal policies should be applied during depressions. Fiscal policy refers to the tax and spend decisions of a governmental authority.
1) Increase deficit spending: Governments should spend themselves out of depression. When the private sector fails to adequately address issues of employment, then the government must. Balancing budgets and attention to the deficit should become marginalised in importance while economic stagnation is at hand. Governments don’t have credit cards but they issue treasury notes and bonds which pay interest to the lender. That is basically how governments borrow money when in deficit. Issue I.O.U.s to lenders which are governments, central banks, currency speculators and private citizens.
2) Tax reduction: Governments should be smart and not burden a distressed population with more taxes. The Bush plan of tax cuts was actually part Keynesianism if only for the well to do. In times of economic challenges, tax cuts should be widely implemented. Whether Barack Obama will extend the Bush tax cuts through 2010 for incomes above 250,000 or repeal them before then in order “to level the playing field” is unknown. Yet Keynesian economics would reject tax increases during a depressionary cycle of unemployment, decline in industrial activity, credit seized and growing destitution in general.
3) Public Works: If one combines the first two components of Keynesian economic activism, there is inevitably a huge deficit: Increase spending and tax reduction means less money for the treasury and, therefore, growing deficits. A deficit is when income is exceeded by spending. Keynes believed that public works is the best application of fiscal policy. Create jobs, hire the unemployed, pay them. They will spend, create effective demand, stimulate the need for production, reduce the unemployment rate and pump money into the system.
Combined, this triad of welfare-state capitalism is “priming the pump.” This is what is contemplated with a $750 billion minimal stimulus package. So let’s call it what it is. The return of Keynesian economics and a rejection of free-market unregulated capitalism: at least for the short term. If neo-classical economics is dead, I will provide the casket since Keynes provided the shovel and dirt.