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Economics of “change” in the era of Obamunism
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Today I interviewed Dr. Edgar K. “Butch” Browning, PhD, professor of economics at Texas A & M University, and author of “Stealing From Each Other: How the Welfare State Robs Americans of Money and Spirit.” (Available at: http://www.amazon.com/s/ref=nb_ss_gw?url=search-alias%3Daps&field-keywords=Stealing+From+Each+Other&x=19&y=17 ) An in depth interview of Dr. Browning’s previous interview on that book is at www.libertywatchradio.com/archive if readers wish to listen.
The main question on today’s table was. “can a Keynesian model of economics work in a down economy?”
First, I enquired as to whether the recently passed “stimulus package,” was designed to engender an immediate improvement in the economy.
Dr. Browning responded, “just a little knowledge of economics would tell you that if you want a quick stimulus, a fiscal stimulus, the way to do it would be to cut tax, because you can do it in a week and people would have higher take home pay next week and it would immediately lead to a stimulus. When you enact all these government programs, some of them take months to gear up just to spend their first dollar.”
Parenthetically, it seems that Ronald Reagan was heavily criticized during his term for “trickle down economics,” yet is that is what the Obamunists have relied upon. What were the economics of John Maynard Keynes?
Dr. Browning replied, “Keynes was a famous British economist of the early 20th century. In 1936 he published his magnum opus, “The General Theory of Employment, Interest, and Money.”
( http://www.amazon.com/General-Theory-Employment-Interest-Money/dp/1607960648/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1237783386&sr=8-1 ) “This was a book that basically said that government could have a large effect on the operation of the economy through its use of government spending programs and taxes, and it kind of legitimized deficit spending as a way of helping economies . Of course it was published during the great depression, and a lot of people wanted to hear a message like that, and this has become a part of our basic economic theory.”
( http://www.amazon.com/General-Theory-Employment-Interest-Money/dp/1607960648/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1237783386&sr=8-1 ) “This was a book that basically said that government could have a large effect on the operation of the economy through its use of government spending programs and taxes, and it kind of legitimized deficit spending as a way of helping economies . Of course it was published during the great depression, and a lot of people wanted to hear a message like that, and this has become a part of our basic economic theory.”
Has history proven Keynes to be largely right or wrong?
Browning replied, “It’s hard to look at history and find any striking example where government spending has quickly cured a recession. We have had, not counting the one we are in now, 7 recessions, and in most of those, the government did very little in a Keynesian sense to get us out of those.”
“In my view, the two most important things people ought to be aware of about recessions is one, they are unavoidable and are going to happen periodically, and two is that the economy will automatically come out of them if the government does nothing. Basically, a market economy is very adaptive and if people are out of work, they look for jobs and ultimately, people who want to make money by hiring workers, and people looking for work usually come together to produce an end to recession. The current recession, for example, would certainly end if the government did nothing ”
I then asked if the actions of the Roosevelt administration shortened the depression.
Browning replied, “the great depression last for about 10 years, with unemployment peaking at 25%. Increasingly economists have been skeptical about what Franklin Roosevelt did in terms of economic policies during these years. A lot of economists believe that what he did probably prolonged the depression, since it lasted longer than any other one in history and it didn’t start off looking like it was going to be unusual.”
How does this recession compare to the one we experienced at the end of the Carter and beginning of the Reagan Administration?
Browning responded, “so far, this recession has already lasted over a year, which is longer than 2000 – 2001. It looks like it’s going to be a longer lasting one than most of the recessions we’ve had since the Second World War, but in terms of the depth of the recession, I think the unemployment rate is 8.1, and in 1982 unemployment peaked at 10.8 %. That’s the highest of any recession we’ve had in the last 50 years. I don’t think many people think it will be that deep, but it could be. “
What are the long-term effects of the current government policies likely to be?
Browning replied, “the news this past week was that the Congressional Budget office estimated is that the new plans over the next ten years will increase the deficit to 1 trillion dollars a year. That would double the national debt, and that would have two effects on people in the future, regardless of whether or not get us out of this recession. Having that large an increase in the national debt, it means that we will have to pay higher taxes in the future to cover the interest on that, and we will have lower growth rates in the future since all that government borrowing crowds out private investment.”
You may want to consider listening to the entire interview, at www.libertywatchradio.com/listen .
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