Concern about the deficits

in our budget and in our trade account is not misplaced; they do affect our ability to sell our Treasuries to finance our wars, our consumption, as well as our economic power which influences our military power and national security. I guarantee the deficits are going to be the Next Big Thing in politics, used against Democrats.

Once again, Free Market theory has everyone in its thrall, and that theory truly hates government deficit spending because, it says, it "distorts" markets. There is a valid argument for running deficits, especially in times of economic meltdown.

Have you noticed the growing attacks on so-called Keynesian economics (which has a place for government deficits) and on any professional economist, like Paul Krugman, who does not totally support Free Market? These attacks are pre-emptive strikes laying the ground work for Republican attacks on Democrats and deficit spending---- especially entitlements and jobs legislation---- in the coming elections.

---

by: Teddy Goodson @ Wed Mar 03, 2010 at 13:23:57 PM CST

We Never Carry Through with Keynesian Economics

All the industrialized nations seem quite willing to agree to the first half of Keynes' view: deficit spending to correct serious contractions in an economy. It's that second part they don't like, the part that says a national economy should pay down its debt in good times.

Of course, Bill Clinton - and, I hate to admit it, Robert Rubin - did set up that scenario, albeit one built on the technology bubble. What did the GOP and Bush sell the American people as soon as they got power? Tax cuts, tax cuts, tax cuts. That was their "solution" to the mild recession that Bush faced in his first term, his alternative to government spending. The biggest recipients, of course, were the wealthy.

It seems to me that the mistake all nations made for the last few decades was to have lived from bubble to bubble to bubble. Bubbles are a common phenomenon of capitalism, but we all made them into an art as the last century was ending. I guess the "killer bubble" was the belief that financial institutions could buy "insurance" against bad lending and bad bets, the infamous credit default swaps.

Now, an inevitable contraction is taking place. I just hope that the economic leaders of the world can avoid what happened politically the last time such a violent contraction took place: the rise of totalitarianism and fascism.

---

by: Elaine in Roanoke @ Wed Mar 03, 2010 at 14:19:15 PM CST

[ Parent | ]