Thomas Geoghegan — Keynesian

Churchill said a fanatic is someone who won’t change their mind and won’t change the subject.  Thomas Geoghegan and his Keynesian pals are fanatics.  Despite massive evidence that government spending does not create wealth, they continue to argue for even more spending.

In an article from Bloomberg News entitled “Obama is Lucky Medicare is Out of Control,” Geoghegan argues that out of control Medicare spending is boosting the economy.  “If Medicare was capped and couldn’t shoot up automatically, unemployment would probably be in double digits,” Geoghegan writes.

This line of faulty reasoning is not new and, in fact, permeates the minds of many of our most powerful government officials.  Nancy Pelosi argued that “Let me say that unemployment insurance… is one of the biggest stimuluses (sic) to our economy. Economists will tell you, this money is spent quickly. It injects demand into the economy, and it’s job creating. It creates jobs faster than almost any other initiative you can name.”

Obama’s Secretary of Agriculture Tom Vilsack argued than Food Stamps (SNAP) creates economic growth, as well: ” I should point out, when you talk about the SNAP program or the foot stamp program, you have to recognize that it’s also an economic stimulus. Every dollar of SNAP benefits generates $1.84 in the economy in terms of economic activity. If people are able to buy a little more in the grocery store, someone has to stock it, package it, shelve it, process it, ship it. All of those are jobs. It’s the most direct stimulus you can get in the economy during these tough times.”

Medicare spending is out of control.  More Americans are on Food Stamps than ever before.  And thank to these policies, unemployment, and hence, unemployment insurance spending, are at historic highs.  Shouldn’t we be the wealthiest country on earth?

History proves these individuals wrong.  The richest period in American history was not the New Deal or the Great Society but 1946 when government spending was reduced by nearly two thirds including massive cuts in military spending.

Tom Woods wrote about this: But, fashionable superstitions notwithstanding, government spending — that is, draining resources from the productive sector and devoting them to arbitrary projects — cannot improve the economy. It can only make things worse. So blinded are Keynesian economists, from whom Obama takes his inspiration, by the view that prosperity is attributable to “spending” per se that they predicted a return to depression conditions when World War II spending came to an end. And indeed in 1946, the year after the war ended, the budget was cut by two thirds. But instead of reverting to depression, what occurred instead was the single most robust year the private economy has ever seen.”

Unfortunately, both political parties are dominated by those who seek government as a salvation. For Democrats it’s social sending.  For Republicans (aka “defense socialists”) it’s military spending.   We will recover economically (if its not too late) when government gets under control, spending is reduced and government ceases to crowd out private investment and we begin to rely on the private sector and not the government for jobs.  Medicare, Food Stamps, unemployment insurance and defense spending won’t provide us our economic salvation.

 

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