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| Master Pundit (or Baiter?) (Image via Theo) |
“When you elect a president, you ought to elect a man who knows where he's going and knows how to get there. And if you don't do that, you get what's coming to you.”
— President Harry S Truman
Related source » The Irony of KeynesLike Mr. Reich, whose excellent article I have excerpted (above), I am not an economist, though I believe it is vital, for every American who votes, to be conversant with its basic principles. Despite having audited four courses in the past couple of years, taught by three tenured economics-professors at North Carolina State, I still get confused by political rhetoric on this, one of the most important subjects facing the electorate.
[This related source is recommended in its entirety.]
“[B]ut to me the struggle at the root of all those is an economic one: Supply Side Economics (SSE) vs. Demand Side Economics (DSE). […] A further source of confusion enters in when economists let their unrevealed political bias color their explanations. Not being an economist, but as someone who has studied this stuff on my own gives me a perspective that might help others get to the essence behind SSE and DSE. […] Supply Side Economics is the theory that individuals un-hindered by government forced wealth re-distribution will choose to be productive and increase the “Supply” of labor and capital producing more “Supply” of goods and services, which will stimulate economic activity and maximize prosperity. Conversely, Demand Side Economics is the theory that government forced wealth re-distribution will spread purchasing power to more people and increase the overall “Demand” for goods and services producing more “Demand” for labor and capital which will stimulate economic activity and maximize prosperity. […] DSE or “Keynesian Theory” when associated with John Maynard Keynes usually refers to targeted re-distribution exemplified by short-term “stimulus” designed to minimize a dip in the “business cycle”. Cash for Clunkers, the 787 Billion Dollar Stimulus Bill, and TARP are recent examples of the original intent of DSE re-distribution. But that is a small part of total DSE. Most wealth re-distribution is done to achieve political or social goals and not for specific economic benefit. Social Security, Medicare, Medicaid, and Obamacare are all re-distributive programs and are social and political programs first and foremost. […] So, what is the difference between wealth re-distribution and “normal” government spending? I would maintain that any fiscal expenditure for a reason other than the essential roles of government is a form of wealth re-distribution. Neither SSE nor DSE questions the need for essential government services, or the idea that taxes must be collected in order to fund them. But of course, the devil is in the details and in this case the detail is how a society defines the “essential roles of government”. In our case we can start with the US Constitution and call anything in that document essential. Anything we have added above and beyond our constitution is, I would contend, wealth re-distribution. […] Again, there are often compelling socio/political reasons for a society to engage in wealth re-distribution. But what often is obscured is the economic damage and deceit involved in this choice. Unfortunately, the underlying premise of DSE is flawed as is the generational theft which accompanies it. […] Supply can satisfy Demand, but Demand can never satisfy Supply. Put another way, all the Demand in the world can never Supply food for the hungry unless there is a reason for producers to Supply food. Demand alone does no good. […] The theory is that Demand alone will stimulate producers to Supply more. But the flaw in that thinking is that the re-distribution of wealth works exactly in the opposite direction in two ways: first, by taking money from producers it reduces the reward for them to create Supply, and second, it disincentivizes Demanders to contribute their labor. It’s a classic lose-lose scenario. […] The current course we are on is as close to a pure Demand Side Economic model as we are likely to ever see. That makes this a watershed moment in the debate over economic theory. Too bad for us we may end up, as the father of DSE John Maynard Keynes famously said, “slaves of some dead economist”. If that isn’t ironic enough for you, consider this; we are being led into this servitude by our First Black President.” [emphasis added]
— Ronny Reich, December 20, 2009 (ibdst.blogspot.com)
And it is small wonder that most of us are confused, because that is precisely what politicians are striving to do in furtherance of their political agendas. Recall that every politician aims to buy your vote by appealing to your own misunderstanding of the economic factors affecting you and future generations of Americans.
In essence, economics is a soft science (some have called it the dismal science). It is very much a work-in-progress and it is extremely difficult to extract neat guidelines that can be relied on to bring about the intended consequences for actions taken on a global scale.
But among those guidelines that have a better than average chance of working as intended is the concept of avoiding what has never worked in the past. This is another way of saying, "Don't be an idiot".
This time it is NOT different.
Post 1,612 Strike While the Irony's Hot
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