Don't
throw Keynes* out with the bath water of failed economic systems.
*John
Maynard Keynes,
5 June 1883 – 21 April 1946) was a British economist whose
ideas have fundamentally affected the theory and practice of modern macroeconomics,
and informed the economic policies of governments. He built on and
greatly refined earlier work on the causes of business cycles,
and is widely considered to be one of the founders of modern
macroeconomics and the most influential economist of the 20th century
His ideas are the basis for the school of thought known
as Keynesian economics and its various offshoots.
List
of economic panics* and depressions throughout U. S. History
1807;
1815; 1857; 1873; 1893; 1896; 1907; 1910; 1920; 1929. Enter Keynesian
economics and 60 years of controlled buisness cycles, In the year 2000 exit Keynesianism, and the resulting
great recession of 2007
*panic,
crisis
in financial and economic conditions, marked by public loss of
confidence in the financial structure. Panics are characterized by a
general rush of investors to convert their assets into cash, with
runs on banks and a rapid fall of the securities market. Bank
failures and bankruptcies naturally follow.
In
my opinion Keynes would have approved of the recession prompted tax
cuts in in 2001 and 2003 to increase consumption and prime the
economic pump. The cuts emulated the successful policies of John
Kennedy and Ronald Reagan. The problem with the Bush cuts were, that
unlike previous stimulative cuts that they were untargeted and
untimed. The economy recovered and the reduced tax revenue caused an
increase in budget deficits.
The
Bush administration was also the first modern one to wage not one but
two wars without increasing government revenue to pay for them. This
further exacerbated the deficits and national debt problems.
When
the inevitable recession hit the economy, there was no room for tax
cuts to be applied and a growing deficit and debt problem mandated
that the only approach was to unleash monetary and fiscal stimulus
measures that helped bring about a recovery but added to the debt
problem.
In
hind sight if the Bush administration had ended the tax cuts at the
peak of the recovery and increased taxes to cover the cost of the
wars, a lower cost of recession recovery could have been employed.
Business
cycles and resultant recessions are an integral part of any
capitalist economic system. The time tested and proven way to reduce
the severity the cycles is to increase consumption via temporary and
targeted tax cuts and deficit spending. The Clinton tax increases
during the highs of the 1990s handed Bush a tool that was squandered,
If
we tax the economic highs and spend in the lows the cycle can be
controlled in a less severe way.
Any
good farmer knows that one good season with good profits is not a
reliable indicator of future years. The farmer will save a portion of
one years earnings to use in the bad years when the weather and
prices are down.
Paul
Hunter paulhunter45177@gmail.com
