Just Because It Is in the Wall Street Journal…

doesn’t mean it makes sense.


The link is to an article titled Four Reasons Keynesians Keep Getting It Wrong.

Well, someone is wrong four times.

1)  big increases in spending and government deficits raise the prospect of future tax increases.

Actually, another good dose of stimulus would probably push the economy into real growth.  The most powerful way to diminish the deficit (and lessen the need for tax increases) is to grow the economy.

2)   most of the government spending programs redistribute income from workers to the unemployed.

In the first place, I seriously doubt this is true.  Or rather, I am certain that the percentage of the federal budget that goes to the unemployed is actually rather small.*   It may be possible to define “spending programs” in such a way that “most” of them redistribute income from workers to the unemployed, but there is some game playing going on there.

In the second place, money to the unemployed is money that gets spent, and fast.  Tax cuts for the wealthy do not get spent.  They get saved.

3)   Keynesian models totally ignore the negative effects of the stream of costly new regulations that pour out of the Obama bureaucracy.

Assuming it is true that the stream of costly new regulations are having significant negative effects on the economy (and I’m not convinced it is true**), this does not in any way mean that Kenyesian policies do not work.

4)   U.S. fiscal and monetary policies are mainly directed at getting a near-term result.

Well, yes and no.  They should be aimed as much as possible at a near term result.  But it is not true that the positive effects (the jobs) disappear as soon as the stimulus ends.  One only has to look at the last stimulus.   Over two million jobs were created while those stimulus dollars were being spent.  Now that those dollars have run out (or are down to a trickle),  the jobs have not disappeared.


I think there was a time when the Wall Street Journal was not just a propaganda organ for the conservative right.  But today it is owned by Rupert Murdoch.



Safety net programs: About 14 percent of the federal budget in 2010, or $496 billion, went to support programs that provide aid (other than health insurance or Social Security benefits) to individuals and families facing hardship.

These programs include: the refundable portion of the earned-income and child tax credits, which assist low- and moderate-income working families through the tax code; programs that provide cash payments to eligible individuals or households, including Supplemental Security Income for the elderly or disabled poor and unemployment insurance; various forms of in-kind assistance for low-income families and individuals, including food stamps, school meals, low-income housing assistance, child-care assistance, and assistance in meeting home energy bills; and various other programs such as those that aid abused and neglected children.

Note that much of that 14% is not going to the unemployed.


**  If regulations are causing so many difficulties, why are equipment and software investments outpacing previous recoveries.  Why do only 13% of small business owners say that regulations are the biggest problem they face.  Also, remember that when a study says that a given regulation is going to cost a given sum of money,  that money is still circulating in the economy and it likely results in jobs.  Finally, to not have the regulations is to accept that economic growth is more important than a clean environment and worker and public protections.  Note that lack of environmental protection is likely to lead to tax increases at a later date to pay for the clean up.


Hat tip:  Althouse