Join Date: July 24, 2009
Location: United States
Re: Political Polls
It is true that the United States follows a mixed economic policy with basic Keynes prinicples but I believe the big problem was that the Bush adminstration tried to do both by throwing more money at Medicare and the Iraq war as well as tax cuts for the wealthiest Americans trying to please both Moderates and Libertarians and in the end pushing the States futher into debt this is the view followed by many economists in the Obama adminstration.
Though Bush’s spending and economic interventionism is not characteristic of the Austrian school’s philosophy, I completely agree with you on Bush; Bush was not a fiscal conservative and thus spent far more than one who labeled themselves as a “conservative” should have. Bush’s spending looked more like a progressive liberal, than anything close to a fiscal conservative; but alas, as a Neoconservative populist, what you stated is his economic milieu. However, that does not absolve the Democratic party of any blame, as their control of Congress allowed for spending to get even further out of control, while during the intervening time, they called for laxer lending laws, most poignantly for minorities (the Republicans in Congress, though not majority party at the time, were also responsible).
It is easy to blame the president, but in the end, Congress sets fiscal policy, and as such, I argue that they are most responsible. I argue that economic interventionism (such as that seen in the housing industry before the crash) was a major cause of the severity of the current American recession, as Congress called for more Americans to own homes. Concurrently, they created a situation where banks were under the pretense that they were backed by the United States government in their relaxing of lending prerequisites. Many blame the government for its lack of regulation, however, in this instance, regulation was not the problem, it was quite the opposite, it was too much government intervention into a market, thus causing a crisis.
Essentially, I believe intervention like that (not all intervention, of course) manipulates the market, and thus allows for a commodity such as homes to have prices manipulated against the actual value and ability of individuals to continue to buy and own that said commodity. Thus, when the market had a hiccup, many people lost their homes and many banks lost their money, causing a systemic crash of the insurance, lending, housing and investment industries. It is with such intervention in the market that makes me a bit skeptical of the Keynesian philosophy, as I see it nothing more than market manipulation through deficit spending; that is where I stand at least, and no doubt, this issue has been debated ad nauseum, so I digress.
I also disagree that Keynesian economics are the only reasons for the recessions in the UK and US of the 80s. Living standards had grown to a point where the birth rate began to drop leading to an aging workforce as well as high unemployment was too much for the welfare state to cope with. However the growing unemployment in Manufactoring and mining was partially becuase of the strength of the pound and the dollar. This I agree with you was something which the model was not ready to adapt to but is not eniterly responsable for.
Indeed, we can agree on this point, as there are always many factors as to why a recession is as light or severe as it is (as the business cycle in the United States economy ensures that they will occur anyway); however, we did not begin to see the aging of the “Baby-boom” or post-WWII workers until the early to mid-nineties.
I go back to my original point the United States is in a far worse state economically than many other countries that followed the Keynes model at the start of this recession and have followed stricter Keynesian principals a 'shining' example is Australia. The stimilus package released by the Rudd Government at the beginning of this recession has lead to recovery and has meant that Australia I believe is the only Western democracy in the world that is not in recession. The package included investment in local government with the condition the money was spent within 6 months of the federal government issue. As well as maintaining high expenditure in Education and health.
You give me Australia, and I once again, give you Japan, which is a fairly strict Keynesian system that has been unable to pull-out of a fifteen year long recession. In the end, the government ran up a large deficit and the Japanese economy remained in the tank. With the onset of the current global financial crisis, Japan’s economy contracted even more, as their export economy took a giant hit and added to a recession that had shown no signs of easing.
Sorry this comment is in such a mess, I'm tired and need to get back to bed.
No problem, I appreciate you taking the time out of your sleep to accommodate one such as myself.