Obama’s Economic Plan is a Bridge to Nowhere
By: Craig Chamberlain
John Maynard Keynes died in 1946, but to hear President elect Obama speak you would think he was going to be heading the treasury department. What does Obama propose to do when he takes office in January? Well other than raise taxes, and increase spending he believes in public works. That’s right, that’s his big plan. The same plan that didn’t help us during the Great Depression, or didn’t help the Japanese during their recession in the 1990′s, and they basically paved over everything they could.
Keynesian economics works something like this(and here I simplify) that in times of economic downturn when private enterprise isn’t getting it done, it is time for the government to step in with massive amounts of new spending to keep the money flowing and keep people working. Then when the recession or depression was over the government would cut back on spending and allow the free market to take over again. Sounds nice doesn’t it? Except there is always a difference between theory and reality.
When governments decide to follow the Keynesian philosophy they have to get the money for it, and there is only one place where that money can come from. The taxpayers will be paying the bill for all these new, and mostly useless, projects. This means government becomes bigger and has more control over the economy, it becomes more powerful, and governments don’t like to give up power or cut the fat out. Government is already too big, the expansion that Obama wants is practically Orwellian.
Aside from the government getting bigger and more intrusive there is the simple fact that Keynesian economics don’t work. When the stock market crashed in 1929 President Hoover, and later President Roosevelt decided that public works were the way to go. We built the Hoover Dam, put thousand of men to work on construction projects. Yet none of that prevented an even bigger stock market crash in 1936, and unemployment was never lower than 14%, that’s hardly an economic success story.
In the 1990′s the Japanese economy, suffering from a downturn fueled by deflation, the Japanese government desperate to keep unemployment low and to stimulate economic activity went on a building binge. They built bridges to nowhere that would have made Ted Stevens ashamed. All the building didn’t get the Japanese economy moving up until deflation ended, consumers started spending, and business became more productive.
Even after Roosevelt the Keynesian philosophy lived on, through the years, with President Nixon proclaiming “we’re all Keynesians now” it’s odd, but the obituary of classical capitalism has been written so many times, that you would think that just once the critics of Laissez Faire would be right at least once. Instead, every time they proclaim the death of the free markets, and try something else, things don’t get better until someone has the brains to go back to free market capitalism. That’s what happened in the U.S. every President from FDR to Jimmy Carter was a big believer in Keynesian economics and what did we get for it? Inflation, price controls, regulations, bigger government, and higher taxes. It wasn’t until Reagan, and someone actually tried classical capitalism again that the American economy took off like a rocket. Now, because of this financial meltdown(which is due to bad business practices, not because laissez faire doesn’t work) the panic laden rhetoric of the media and the incoming administration were about to abandon the economic philosophy that has sustained long term economic growth.
Obama’s economic plan won’t accomplish any real economic growth. The only engine for economic growth is the free market. The Keynesian belief won’t add anything to the economy, but it will add to the debt, the tax burden, and increase the federal leviathan. If Obama goes through with his economic plans we can expect the economy to go from shaky to catastrophic. John Maynard Keynes is dead, it’s time his wrong headed economic philosophy join him.