Barack Obama: The Anti-Keynesian?
New York Times columnist and economist Paul Krugman thinks Barack Obama is an “anti-Keynesian” when it comes to economic matters.
PAUL KRUGMAN: Can I just say, on the Reagan thing, if public-sector employment had continued to expand the way it did during Reagan’s first term, instead of falling by about 600,000 as it has, right there we’d have something like 1.4 million people working in this country.
So if you actually look at the actual track record of government spending, government employment, Reagan is the Keynesian and Obama — mostly because of political constraints, although a little bit of lack of conviction on the part of his own people, has been the anti-Keynesian. He’s been the one who’s been doing what Republicans say is the right answer.
Ronald Reagan was not a Keynesian. As Milton Friedman noted in his speech at the opening of the Cato Institute in 1993, “Reaganomics had four simple principles: lower marginal tax rates, less regulation, restrained government spending, noninflationary monetary policy. Four cornerstones that led to the following:
Real economic growth averaged 3.2 percent during the Reagan years versus 2.8 percent during the Ford-Carter years and 2.1 percent during the Bush-Clinton years. Real median family income grew by $4,000 during the Reagan period after experiencing no growth in the pre-Reagan years; it experienced a loss of almost $1,500 in the post-Reagan years. Interest rates, inflation, and unemployment fell faster under Reagan than they did immediately before or after his presidency. The only economic variable that was worse in the Reagan period than in both the pre- and post-Reagan years was the savings rate, which fell rapidly in the 1980s. The productivity rate was higher in the pre-Reagan years but much lower in the post-Reagan years.
Yet, Obama is anti-Keynesian after spending $830 billion dollars on a failed stimulus program that had left the unemployment rate over 8% for over 38 months. A program that would never allow unemployment to rise above 8% and would produce robust economic growth. All of this would be induced by deficit spending. The president stated that the stimulus would create 2.5 million “shovel ready jobs” for infrastructure projects. In fact, in an interview with Peter Baker of The New York Times, the president admitted that “he let himself look too much like “the same old tax-and-spend Democrat, realized too late that there’s no such thing as shovel-ready projects and perhaps should have let the Republicans insist on the tax cuts in the stimulus.” In addition, his Vice President, Joe Biden, reiterated the Keynesian approach of this administration three years ago by stating that we must spend our way out of bankruptcy.
Also, to say”[Obama’s] been the one who’s been doing what Republicans say is the right answer” is patently false. Republicans aren’t for class warfare legislation, like the Buffet Rule tax reform, that institutes a mandatory 30% tax on millionaires, but leaves the charitable donation deduction. Hence, the rich, also known and the job creating and investing class, could donate their way out of taxation. Furthermore, Republicans never were for spending a trillion dollars on a new health care entitlement, Obamacare, that will cut 20 million Americans from their coverage while making 49 million more citizens dependent on government run medical services.
Nevertheless, it didn’t stop Paul Krugman from making more patently false remarks on ABC’s This Week.
KRUGMAN: Can I just — these are — these are — we’re talking as if $1 billion was a lot of money, and in $15 trillion economy is not. Solyndra was a mistake as part of a large program, which has been — by and large had a pretty good track record. Of course you’re going to find a mistake. I think, to be fair, that’s probably true in Massachusetts, as well.
But this is — this is ridiculous, that we are taking these tiny, tiny missteps which happen in any large organizations, including corporations, including Bain — Bain Capital had losers, too, right, even from the point of view of its investors? So this is ridiculous.
And the fact of the matter is, this president has not managed to get very much of what he wanted done. He — it’s terribly unfair that he’s being judged on the failure of the economy to respond to policies that had been largely dictated by a hostile Congress.
First of all, concerning clean energy initiatives, Solyndra is the tip of the iceberg. Furthemore, it’s not just $1 billion dollars as:
“CBS News counted 12 clean energy companies that are having trouble after collectively being approved for more than $6.5 billion in federal assistance. Five have filed for bankruptcy: The junk bond-rated Beacon, Evergreen Solar, SpectraWatt, AES’ subsidiary Eastern Energy and Solyndra.
SunPower landed a deal linked to a $1.2 billion loan guarantee last fall, after a French oil company took it over. On its last financial statement, SunPower owed more than it was worth. First Solar was the biggest S&P 500 loser in 2011 and its CEO was cut loose – even as taxpayers were forced to back a whopping $3 billion in company loans. Nobody from the Energy Department would agree to an interview.
How safe were the loans?
[Economist] Peter Morici replied… It’s, it is a junk bond…but it’s not even a good junk bond. It’s well below investment grade. Was the Energy Department investing tax dollars in something that’s not even a good junk bond? Morici says yes. This level of bond has about a 70 percent chance of failing in the long term,” he said.”
Furthermore, Robin Millican, Policy Director for the Institute for Energy Research, has stated how the Section 1603 program has allocated $20 billion dollars in cash payments, not loans that need to be repaid, to companies that install solar, wind and geothermal properties. Congress wants to extend this program for an additional year at the tune of $3 billion dollars.
Lastly, the president has achieved most of his domestic agenda. Obamacare was the signature achievement in the president’s first term. In addition, there was Cash for Clunkers, Dollars for Dishwashers, Cash for Caulkers, and the Dodd-Frank Wall Street Reform and Consumer Protection Act. If Mr. Krugman thinks the president is dealing with a hostile congress, he only needs to look at the docket that shows this hostility has produced a multitude of legislation aimed at creating jobs and curbing the debt and deficit. Most of the bills have been blocked by the Democratic controlled senate.
(h/t Noel Sheppard)