Is Romney the Keynesian choice in November?

posted at 5:43 pm on June 4, 2012 by Allahpundit

Lefty Ezra Klein wonders. The good news? The One’s dismal week is forcing liberals to come to grips with the increasingly real possibility of a Romney presidency. The bad news? The silver lining that Klein’s found for Democrats might not be as bogus as you’d wish. It hinges on two things. First, undeniably, the odds of Romney getting elected and having a Republican Congress to work with are much greater than Obama getting re-elected and having a Democratic Congress to work with. And that’s important since we are, after all, facing “Taxmageddon” when the Bush tax cuts lapse at the end of the year and the automatic spending cuts (including defense spending cuts) that were dictated by the last debt-ceiling deal go into effect. The economy’s going to get gut-punched unless Congress does something, and our best shot at getting them to do something is a big red wave in November that breaks the gridlock.

Second, if you’re a true blue Keynesian who believes in deficit spending (and tax cuts) during a recession to promote growth, then good news — Romney might agree with you. Paul Krugman’s been calling him a closet Keynesian since February:

Speaking in Michigan, Mr. Romney was asked about deficit reduction, and he absent-mindedly said something completely reasonable: “If you just cut, if all you’re thinking about doing is cutting spending, as you cut spending you’ll slow down the economy.” A-ha. So he believes that cutting government spending hurts growth, other things equal…

Almost surely, he is, in fact, a closet Keynesian.

How do we know this? Well, for one thing, Mr. Romney is not a stupid man. And while his grasp of world affairs does sometimes seem shaky, he has to be aware of the havoc austerity policies are wreaking in Greece, Ireland and elsewhere.

Romney said something similar to Mark Halperin during their interview a few weeks ago:

Halperin: You have a plan, as you said, over a number of years, to reduce spending dramatically. Why not in the first year, if you’re elected — why not in 2013, go all the way and propose the kind of budget with spending restraints, that you’d like to see after four years in office? Why not do it more quickly?

Romney: Well because, if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%. That is by definition throwing us into recession or depression. So I’m not going to do that, of course. What you do is you make adjustments on a basis that show, in the first year, actions that over time get you to a balanced budget. So I’m not saying I’m going to come up with ideas five or ten years from now that get us to a balanced budget. Instead I’m going to take action immediately by eliminating programs like Obamacare, which become more and more expensive down the road – by eliminating them, we get to a balanced budget. And I’d do it in a way that does not have a huge reduction in the first year, but instead has an increasing reduction as time goes on, and given the growth of the economy, you don’t have a reduction in the overall scale of the GDP. I don’t want to have us go into a recession in order to balance the budget. I’d like to have us have high rates of growth at the same time we bring down federal spending, on, if you will, a ramp that’s affordable, but that does not cause us to enter into a economic decline.

Lefty writers have been crowing about that since the moment the Time interview was published. Now Klein puts the pieces together:

There’s a good chance that a Romney administration would extend both Bush and Obama’s tax cuts and delay the scheduled spending cuts. Congress would raise the debt ceiling after Romney promised congressional Republicans that he’d sign some variant of Paul Ryan’s budget as soon as it’s sent to him. Somewhere along the way, Romney would pass both more short-term tax cuts and a long-term transportation bill — something Republicans have been blocking under Obama — that doubles as an infrastructure package and includes, to secure Republican support, the Keystone XL oil pipeline.

Nor is it clear that this will come at the cost of harsh deficit reduction in coming years. There will almost certainly be deep spending cuts if Romney is president, but both the Romney and Ryan proposals include trillions of dollars in unpaid-for tax cuts and defense spending. If Republicans decide to assume that deep tax cuts will lead, through supply-side magic, to larger revenues, their deficit-reduction plans might well end up increasing the deficit over the next few years, even if it does so in a regressive way. Remember, wrote Business Insider’s Joe Weisenthal, “Republicans were pro-deficit, and pro-entitlement expansion under Bush and Reagan. Deficit cutting only became part of the party’s ideology under Obama.”

Extending the tax cuts is a fait accompli if the GOP takes back the government in the fall but I’m honestly curious to see how Romney will sell his opposition to sudden deep spending cuts to a base that’s already suspicious of his commitment to small government. If Republicans end up controlling both chambers of Congress, what will the excuse for delaying action be? “Keynes was right”? Paul Ryan can give him some cover by virtue of the fact that his own Path to Prosperity is designed to shrink government gradually to minimize disruption to individuals’ economic planning. But even with Ryan in his corner, there’ll be some critical mass of tea-party Republican legislators — Rand Paul foremost among them, no doubt — that wants to use the GOP’s advantage to enact the same sort of sweeping change that the Democrats did with ObamaCare. How does Romney get out of that political jam when they start pounding the table? He’s not going to do something which he thinks will force a major economic contraction; does he try to build congressional majorities to delay deep cuts by replacing recalcitrant tea partiers with Democrats, knowing that the optics of that might only increase his headaches? If he thinks that conservatives will grant him a honeymoon period after he’s sworn in on issues as critical as the size of the federal budget and the speed with which meaningful cuts are made, I think he’s kidding himself. But maybe Klein’s right that this can be finessed by signing Paul Ryan’s budget — and getting to work on entitlement reform, assuming that Romney has the nerve to do so. Righties might forgive him the heresy of continuing spending in the short term if he achieves something significant to curb mandatory spending long-term. Think he can get a majority of Republicans in both chambers to go along with that? If so, you have more confidence in them than I do.


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why are you people so stupid?

tpw on June 4, 2012 at 5:49 PM

You picked the only candidate in the world that was responsible for the blueprint for ObamaCare…to run for office with the goal of dismantling ObamaCare.

Why are you people so f**king stupid?

MadisonConservative on June 4, 2012 at 6:30 PM

I’m growing a nice, healthy disgust for people like this. I take offense to them calling themselves Americans.

/spit

Wolfmoon on June 4, 2012 at 6:27 PM

try to save your disgust. they enjoy it. when you wrestle with pigs you both get dirty and the pigs enjoy it. like the picture of whats her name, cupp, save the outrageous outrage. and laugh at them.

t8stlikchkn on June 4, 2012 at 6:31 PM

bayam on June 4, 2012 at 6:20 PM

Calvin Coolidge begs to disagree with you.

chemman on June 4, 2012 at 6:31 PM

Guy, I’m saying that because the government plays such a large role in our mixed economy removing the government outright and quickly would result in a severe downturn.

Romney is right on this point.

joey24007 on June 4, 2012 at 5:53 PM

The government is the problem, not the solution.

FloatingRock on June 4, 2012 at 6:34 PM

Why are you people so f**king stupid?

MadisonConservative on June 4, 2012 at 6:30 PM

i dont think many here had romney in their top 5 choices, based on all the HA polls during the primaries.

t8stlikchkn on June 4, 2012 at 6:36 PM

You The voters picked the only candidate in the world that was responsible for the Obama claims was the blueprint for ObamaCare…to run for office with the goal of dismantling ObamaCare. Fixing the economy

Why are you people so f**king stupid? Why didn’t any real conservatives run instead of losers?

MadisonConservative on June 4, 2012 at 6:30 PM

OrthodoxJew on June 4, 2012 at 6:36 PM

The government is the problem, not the solution.

FloatingRock on June 4, 2012 at 6:34 PM

i think you probably both agree on that. i think his point is because the friggin tentacles of the bloated leviathan have so infected every sector of the economy, and created so many in the dependency class, by ripping the alien off the economys face (quickly) would severely damage the host. so ease it off slowly, and hope it didnt lay an egg in your stomach. like that.

t8stlikchkn on June 4, 2012 at 6:39 PM

would you mind describing the “subsidies” to healthcare, construction and real estate? vis a vis vis healthcare are you including the distorting of govt 3rd party payors?

t8stlikchkn on June 4, 2012 at 6:21 PM

By all means. For healthcare, in addition to the obvious direct subsidies from Medicare, Medicare Part D, and Medicaid, employer health-care benefits are tax-deductible – indeed, the healthcare benefit is the largest single deduction in the tax code each year. So the ogvernment preferentially supporter health insurance coverage – the vast majority of Americans have directly government subsidized healthcare. Two other forms of subsidy are the HMO Act of 1973 (sponsor: Ted Kennedy) which provided Federal grants and loans to set up HMOs and mandated employers with more than 25 employees had to use them (the employer mandate, compare with today’s individual mandate); and the ban on drug re-importation which acts as a price support subsidy for pharma companies in the US since they can charge higher prices domestically than they do on the world market.

For construction and real estate, there are huge numbers of subsidies, but I’ll just flag the biggest components – gov’t support for mortage lending via Fannie Mae and Freddie Mac (and some HUD programs), and the mortage tax break, which distorts the market in favor of taking on housing debt.

Inkblots on June 4, 2012 at 6:39 PM

The government is the problem, not the solution.

FloatingRock on June 4, 2012 at 6:34 PM

As appealing as it sounds, you can’t just, say, throw thousands of government workers out of work in one fell swoop without damaging the economy. Once there is economic growth and private sector jobs are available to them (and everyone else) deeper cuts can be made.

What can be done early on is to reform federal benefits which are way too lavish compared to the private sector.

Buy Danish on June 4, 2012 at 6:39 PM

CTSherman on June 4, 2012 at 5:55 PM

In time. In time, my friend.

HerneTheHunter on June 4, 2012 at 6:40 PM

The government is the problem, not the solution.

FloatingRock on June 4, 2012 at 6:34 PM

Yes to a large extent the Government is the problem and it should be parred back to its original constitutional limits. I get it that you think Gary Johnson can do this. My question is how. No groundwork has been laid to in Congress or in law changes that would allow him to do more than tinker around the edges also.

chemman on June 4, 2012 at 6:44 PM

For construction and real estate, there are huge numbers of subsidies, but I’ll just flag the biggest components – gov’t support for mortage lending via Fannie Mae and Freddie Mac (and some HUD programs), and the mortage tax break, which distorts the market in favor of taking on housing debt.

Inkblots on June 4, 2012 at 6:39 PM

ok, so you are using “subsidy” for tax deductions, effects of GSEs and the like, as opposed to direct payments. “subsidy” meaning any direct or indirect market distortion. sometimes the left uses that term implying direct payments. and sometimes they do it intentionally to mislead. their voters anyway.

t8stlikchkn on June 4, 2012 at 6:45 PM

Lower government spending has never played a role in economic recovery after a major recession in any part of the modern world over the past several decades. Where do you come up with that type of claim- i sounds like pure ideology.

bayam on June 4, 2012 at 6:20 PM

You need to check your facts, friend. It did precisely that in Eastern Europe, most notably Poland and Estonia, in the early-to-mid 1990s. And it’s done the same in the West when it’s been tried – it worked in the US in 1921 and again in 1945-46. The primary reason I can’t offer a more recent example in this country is that Keynesians like Romney have dominated the White House and Congress for so long it simply hasn’t been done since then.

Inkblots on June 4, 2012 at 6:45 PM

Second, if you’re a true blue Keynesian who believes in deficit spending (and tax cuts) during a recession to promote growth, then good news — Romney might agree with you.

Allah do you think that Milton Friedman is a ‘true blue Keynesian’ too?

lexhamfox on June 4, 2012 at 6:47 PM

Buy Danish on June 4, 2012 at 6:39 PM

You can’t throw thousands out anyway, no matter how badly we want to shut down mostly useless government agencies. With the exception of Senior managers who serve at the will of the president all those other workers have Civil Service protection. You either have to get Congress to change that protection or get SCOTUS to overturn those laws. Don’t see either happening. So the only option left is no more hiring of new people until you have worked through all the excess. That will take decades.

chemman on June 4, 2012 at 6:49 PM

To all of the Keynesian Romney fans out there, this is for you:

http://www.youtube.com/watch?v=XObcP69dhCg

FloatingRock on June 4, 2012 at 6:51 PM

I’m tired of electing ‘smart’ people that ‘know better than us’. They seem pretty stupid. Better to elect someone that just does what we tell them or gets out of the way. But anyway, looks like we can’t leave Romney on cruise control if elected and expect to get to our destination. We will need to turn the wheel the whole time.

MechanicalBill on June 4, 2012 at 6:57 PM

My question is how.

chemman on June 4, 2012 at 6:44 PM

Well step one is to vote for somebody who will actually try.

As for Gary Johnson; unlike Romney, his record as the two term governor of NM is stellar. He has a proven track record of not only trying, but also succeeding in reform, and more importantly did so in a manner consistent with the Constitution and BOR.

FloatingRock on June 4, 2012 at 6:57 PM

If we all vote for Gary Johnson instead we can turn back to the American way of freedom and prosperity and leave the corporate statists like Romney and Bloomberg by in our dust.

FloatingRock on June 4, 2012 at 5:47 PM

If. If. If.

If my aunt had balls she’d be be my uncle.

pain train on June 4, 2012 at 6:57 PM

Paul Krugman says Mitt Romney is not a stupid man?

Is it too late to vote for Ron Paul?

Maybe Obama’s not that bad. After all, any man who can pilot a helicopter to Obama bin Laden’s secret compound, rappel down the rope, take him out with a single shot, jump back up to the helicopter, and pilot it back to the White House while serving as president is someone you definitely want on your side.

/sarc

tom on June 4, 2012 at 6:58 PM

There’s no debate on this point: Romney is a Keynesian in his understanding of political economy. Listen for yourself:

“Now, I’m not going to cut a trillion dollars in the first year. And I heard a question. Why not? And the answer is: taking a trillion dollars out of a $15 trillion economy would cause our economy to shrink and would put a lot of people out of work.” -Mitt Romney
http://www.youtube.com/watch?v=C8g8YcCe_io

This is pure Keynesian thinking. Government spending is the driver of demand and economic growth; cutting government spending will destroy demand and hinder economic growth. [Note 1]

What Gov. Romney apparently doesn’t understand is that the government must take money out the economy in order to spend it. So, no, cutting government spending by $1 trillion is not ” taking a trillion dollars out of a $15 trillion economy”; rather it is leaving it in the hands of individuals and businesses, [Note 2] who, history shows, will in general make much more productive choices about the allocation of capital than a group of central planners sitting in Washington, D.C. Those planners simply don’t have the information necessary to productively allocate capital, even if they were entirely devoted to the public interest; the fact that lobbyists and special interest groups play such a large role in these decisions only makes their choices worse and the impact on our economy more harmful.

But, there you have it, ladies and gentlemen: the “conservative” choice for president thinks cutting government spending will take money out of the economy. Caveat emptor, indeed. [Note 3]

Inkblots on June 4, 2012 at 5:58 PM

Note 1. Reducing spending, without corresponding tax cuts, will indeed reduce economic activity.

Note 2. What you don’t understand is that reducing spending, without tax cuts, does not leave more money in the hands of the private sector. If taxes stay the same then reductions in spending does not mean there is more money in the hands of the private sector.

Note 3. It’s silly for you to pretend you have a better understanding of the fiscal realities than Romney. What is apparent is that you have no understanding of the political realities. In order for Change to be effective and permanent it must receive widespread political support. The kind of change you want is too extreme to receive the support necessary to be implemented.

Basilsbest on June 4, 2012 at 6:58 PM

Note 3. It’s silly for you to pretend you have a better understanding of the fiscal realities than Romney.

Basilsbest on June 4, 2012 at 6:58 PM

No it isn’t. The guy might have Ph. D. in Econ for all you know. Romney’s not God and beyond question, you sycophantic idiot.

ddrintn on June 4, 2012 at 7:00 PM

sometimes the left uses that term implying direct payments. and sometimes they do it intentionally to mislead.

t8stlikchkn on June 4, 2012 at 6:45 PM

Absolutely correct. When they’re not taxing oil companies 100 percent, they claim to be subsidizing them.

John the Libertarian on June 4, 2012 at 7:00 PM

If. If. If.

If my aunt had balls she’d be be my uncle.

pain train on June 4, 2012 at 6:57 PM

All we gotta’ do is just doit doit doit

FloatingRock on June 4, 2012 at 7:01 PM

What most on the left *think* is Keynesian economics is not Keynesian economics. Keynes was for running surpluses in good times to pay off debt and in bad times you keep government spending constant and run a deficit to act as an economic flywheel. He did not advocate perpetual deficit spending or attempting to use government as an accelerator on the economy. He understood that government is a BRAKE on the economy and that during good times you apply the brake a little (increase taxes to pay off debt) and in bad times you let off the brake (reduce taxes and incur budget deficits).

The novel notion of Keynes was he showed that there was a legitimate reason for running a budget deficit. He understood that economic cycles are often longer than budget cycles.

John Maynard Keynes was also a fan of “The Road to Serfdom”.

crosspatch on June 4, 2012 at 5:50 PM

Unfortunately, Keynes was naive enough not to grasp that giving public officials an excuse to give away pork and defend it as being good for the economy would inevitably lead to a snowball effect and back-breaking deficits.

In the real world, that’s what “Keynesian economics” leads to.

tom on June 4, 2012 at 7:01 PM

Allah’s next post: Is Romney REALLY Pro-life?

changer1701 on June 4, 2012 at 7:04 PM

As appealing as it sounds, you can’t just, say, throw thousands of government workers out of work in one fell swoop without damaging the economy.

Buy Danish on June 4, 2012 at 6:39 PM

With so many fewer agents of the government trying to control our lives the American people will be that much freer to prosper, and if our government were responsible instead of corrupt and profligate, people would have more hope for the future.

FloatingRock on June 4, 2012 at 7:05 PM

Great work, AP. Regurgitating Krugman!

Stir up the readers, depress the turnout!

You’ll have Obama re-elected in no time!

Crefonso on June 4, 2012 at 7:06 PM

tom on June 4, 2012 at 6:58 PM

in golf spikes no less

t8stlikchkn on June 4, 2012 at 7:06 PM

Great work, AP. Regurgitating Krugman!

Stir up the readers, depress the turnout!

You’ll have Obama re-elected in no time!

Crefonso on June 4, 2012 at 7:06 PM

It’s what he does best. I believe that he is actually Jim Messina.

cicerone on June 4, 2012 at 7:12 PM

This is pure Keynesian thinking. Government spending is the driver of demand and economic growth; cutting government spending will destroy demand and hinder economic growth. [Note 1]

What Gov. Romney apparently doesn’t understand is that the government must take money out the economy in order to spend it. So, no, cutting government spending by $1 trillion is not ” taking a trillion dollars out of a $15 trillion economy”; rather it is leaving it in the hands of individuals and businesses….

Inkblots on June 4, 2012 at 5:58 PM

Note 1. Reducing spending, without corresponding tax cuts, will indeed reduce economic activity.

a one trillion cut right now, would not put more money in anyones hands unfortunately. 1.3tril is borrowed. now that borrowing is going to be catastrophic. and soon. when int rates go up from 1% to more rational 3-5%. but now, if one tril is cut, AND no tax cuts are made, then i think inks got a point there.and that one tril cut wouldnt even get us to balance. an argument can be made that we cut the one tril, CUT taxes, and then increased economic growth generates MORE gross revenue. yes. and that is the correct argument. however, i think that the timeframe for that “payback”, that period before the increased revenues kicks in, we’d be talking an actual nominal decrease in GDP. make sense?

t8stlikchkn on June 4, 2012 at 7:12 PM

Note 2. What you don’t understand is that reducing spending, without tax cuts, does not leave more money in the hands of the private sector. If taxes stay the same then reductions in spending does not mean there is more money in the hands of the private sector.

How is this true? If you cut government spending without cutting taxes, that means the government has to borrow less through selling bonds. If the government is selling fewer bonds, that means investors will have to invest that money in the private sector. Is there something I’m missing?

NukeRidingCowboy on June 4, 2012 at 7:14 PM

John Maynard Keynes was also a fan of “The Road to Serfdom”.

crosspatch on June 4, 2012 at 5:50 PM

May be, but I doubt it. In any case, Keynes was a central planner who thought you could save liberal democracy with fascist-style state control over investment.

No, thank you.

AshleyTKing on June 4, 2012 at 6:23 PM

No, Keynes really was a fan of “The Road to Serfdom.” Economically, he was not as liberal as a lot of people think.

The real problem with him was that he handed a mechanism to the left to spend money from the public treasury and claim they were “managing” the economy. This was of course far too tempting for 90% of government officials.

Excellent article about Keynes from the 1981 issue of the American Spectator. (That’s right. Way back during the Reagan Administration.)

The Involuntary Unemployment of John Maynard Keynes

tom on June 4, 2012 at 7:20 PM

Should Romney win the Presidency and the Republicans take both houses of Congress, I and many Conservatives will be watching them and seeing if they screw up like Bush and the (R) Congress. This is the last chance for the Republican Party. Become big government spenders, and I will have no problem voting for a third party and abandoning the Stupid Party.

Decoski on June 4, 2012 at 7:23 PM

If he thinks that conservatives will grant him a honeymoon period after he’s sworn in on issues as critical as the size of the federal budget and the speed with which meaningful cuts are made, I think he’s kidding himself. But maybe Klein’s right that this can be finessed by signing Paul Ryan’s budget — and getting to work on entitlement reform, assuming that Romney has the nerve to do so. Righties might forgive him the heresy of continuing spending in the short term if he achieves something significant to curb mandatory spending long-term. Think he can get a majority of Republicans in both chambers to go along with that? If so, you have more confidence in them than I do.

If Romney wins the Presidency and Republicans take back the Senate, they will still not have a filibuster-proof majority, but at most 53 or 54 Republican Senators. Even if Tea Partiers in the House will be pushing Romney to the right, any spending-cuts bill that is too draconian will be filibustered by Senate Democrats. In order to peel off a few Democrats to gain cloture, the Tea Partiers in the House will need to make some concessions in joint House-Senate conference committees.

Romney probably knows this, since he was Governor of a state with a veto-proof majority AGAINST him. He will certainly have a stronger hand as President than he did as Governor of Massachusetts, but he will still need to make some deals to overcome Democrat filibusters, and has the experience in negotiating with a much more hostile legislature than he would find in Washington in 2013. This ability to negotiate will probably be a very POSITIVE trait in Romney’s ability to get things done.

Steve Z on June 4, 2012 at 7:24 PM

Romney probably knows this, since he was Governor of a state with a veto-proof majority AGAINST him. He will certainly have a stronger hand as President than he did as Governor of Massachusetts, but he will still need to make some deals to overcome Democrat filibusters, and has the experience in negotiating with a much more hostile legislature than he would find in Washington in 2013. This ability to negotiate will probably be a very POSITIVE trait in Romney’s ability to get things done.

Steve Z on June 4, 2012 at 7:24 PM

You would certainly expect a businessman to be a good negotiator, but I’ve seen no evidence of Romney’s negotiating skills in politics so far. As nearly as I can see, he always wound up giving the opposition more than they demanded.

Where does this unreasonable hope come from? Desperation? Optimism? An endorphin high from a 26-mile run? Drugs?

tom on June 4, 2012 at 7:29 PM

Allah’s next post: Is Romney REALLY Pro-life?

changer1701 on June 4, 2012 at 7:04 PM

Yep, at some level this is just hit-whoring on a slow Monday.

slickwillie2001 on June 4, 2012 at 7:35 PM

Where does this unreasonable hope come from? Desperation? Optimism? An endorphin high from a 26-mile run? Drugs?

LMAO!

CTSherman on June 4, 2012 at 7:41 PM

With so many fewer agents of the government trying to control our lives the American people will be that much freer to prosper, and if our government were responsible instead of corrupt and profligate, people would have more hope for the future.

FloatingRock on June 4, 2012 at 7:05 PM

Yes, that’s true. But you can’t toss them out all at once.

Buy Danish on June 4, 2012 at 7:42 PM

Note 1. Reducing spending, without corresponding tax cuts, will indeed reduce economic activity.

Note 2. What you don’t understand is that reducing spending, without tax cuts, does not leave more money in the hands of the private sector. If taxes stay the same then reductions in spending does not mean there is more money in the hands of the private sector.

Note 3. It’s silly for you to pretend you have a better understanding of the fiscal realities than Romney. What is apparent is that you have no understanding of the political realities. In order for Change to be effective and permanent it must receive widespread political support. The kind of change you want is too extreme to receive the support necessary to be implemented.

Basilsbest on June 4, 2012 at 6:58 PM

I see others have ably replied to your points already, but allow me to do so as well.

1.) I spoke of growth, not activity. Some economic activity – what I lump under the heading of “malinvestment” – is destructive of wealth. The reduction of wealth-destroying malinvestment, a particular type of economic activity, is a feature of reducing government spending, not a bug. The resources freed for allocation by the market will in short order replace this bad activity with productive activity as the economy returns to sustainable growth.

2.) As has been pointed out, reducing gov’t spending without tax cuts does indeed leave more money in the hands of the private sector. If the government reduces its borrowing, there will be a greater pool of capital available for allocation by the market – people might invest in equities, corporate bonds, or even directly make capital expenditures with money that otherwise would have flowed into government bonds. The reduction in private investment caused by government borrowing is a well-known concept, and is referred to as the “crowding out” effect.

Even if we assume that the gov’t is funding its expenditures not by draining the capital markets by taking loans, but by direct monetization – printing money – this again extracts wealth from the private sector. When the government prints money, the value of the dollar drops, reducing the purchasing power of all those who hold dollars. Thus, the value of private savings is reduced, again leaving fewer savings to be invested by market actors when economic opportunities arise.

Thus, whether government spending is funded by taxes, borrowing, or printing, all forms of spending directly remove wealth from the private sector; conversely, spending cuts return money to the private sector. This is what is meant when people say that government spending is itself a tax.

3.) As I hope I’ve just demonstrated, in a very real way it is more correct to say “Now, I’m not going let the government spend 4 trillion dollars in the first year. And I heard a question. Why not? And the answer is: taking a 4 trillion dollars out of a $15 trillion economy causes our economy to shrink and puts a lot of people out of work.” I don’t know what Mr. Romney’s understanding of this issue is – that’s the trouble with him, he’s been running for president continuously for 7 years now, and I frankly have no idea what he actually intends to do in office. But he either suffers from the same Keynesian delusions most of our public leaders have labored under for the past 80 years, or he thinks it to his political advantage to feign so.

Inkblots on June 4, 2012 at 8:02 PM

There will almost certainly be deep spending cuts if Romney is president, but both the Romney and Ryan proposals include trillions of dollars in unpaid-for tax cuts and defense spending.

Read this sentence VERY carefully, it represents what is wrong with America’s political aristocracy and the left. There is no such thing as a unpaid for tax cut. That money legally, morally and ethically belongs not to the United States Government, but to the people who earned it.

SWalker on June 4, 2012 at 8:14 PM

The problem here is that people want him to talk like Ron Paul and say the conventional wisdom is all wrong and that government spending itself does not add to GDP and we can cut it immediately. That is just not realistic politically. Of course he needs a plan to cut spending over years. If he claimed he could do it in a one shot bang, THAT would be a lie.

Resolute on June 4, 2012 at 8:19 PM

I don’t know what Mr. Romney’s understanding of this issue is – that’s the trouble with him, he’s been running for president continuously for 7 years now, and I frankly have no idea what he actually intends to do in office.

Inkblots on June 4, 2012 at 8:02 PM

Well done, sir.

I’m sure if you read through all of Mitt’s campaign PR and website, you might have a better understanding of Mittnomics. But if you and I, people that actually read and comment at political websites like HA don’t have a clue of the details, why would anyone else?

CTSherman on June 4, 2012 at 8:24 PM

Rmoney™, go figure.

Bmore on June 4, 2012 at 8:39 PM

Lower government spending has never played a role in economic recovery after a major recession in any part of the modern world over the past several decades. Where do you come up with that type of claim- i sounds like pure ideology.

bayam on June 4, 2012 at 6:20 PM

Two recent examples.

Clinton.

Lost the House Gingrich (a real conservative) became speaker. He forced Clinton to cut spending and actually we went into the black we had a surplus. Welfare Reform was the biggest cut forcing welfare queens to work.

GHW Bush. Sort of the Opposite.

Republicans were spending like mad. So much they lost the House Poloski took over as Speaker in Jan 2007 Spending went through the roof and our Great Recession started as people stated losing jobs. Obama took over in 2009 and sky rocked spending. Thus the 40 long weeks of 8%+ unemployment going into a double dip recession.

Steveangell on June 4, 2012 at 9:01 PM

Well done, sir.

I’m sure if you read through all of Mitt’s campaign PR and website, you might have a better understanding of Mittnomics. But if you and I, people that actually read and comment at political websites like HA don’t have a clue of the details, why would anyone else?

CTSherman on June 4, 2012 at 8:24 PM

Typical Alinskyite tactic.

Completely take out of context a quote.

Enough said take this to your DNC blog.

Steveangell on June 4, 2012 at 9:08 PM

Yes, that’s true. But you can’t toss them out all at once.

Buy Danish on June 4, 2012 at 7:42 PM

The more, the merrier.

FloatingRock on June 4, 2012 at 9:15 PM

Typical Alinskyite tactic.

Completely take out of context a quote.

Enough said take this to your DNC blog.

Steveangell on June 4, 2012 at 9:08 PM

What about YOUR DNC blog, Willardbot?

Dunedainn on June 4, 2012 at 9:57 PM

Partially because of the uber spending spree obama has been on, we actually NEED to cut government to the bone without reducing taxes for a few years.

We’re TRILLIONS of dollars in debt. That needs to be squashed ASAP, otherwise we need to have a world war to erase the debt crisis on this planet.

Which do you prefer?

Wolfmoon on June 4, 2012 at 10:10 PM

Crefonso on June 4, 2012 at 7:06 PM

Yup. I call black ops by Klein.

smellthecoffee on June 4, 2012 at 10:15 PM

No, Keynes really was a fan of “The Road to Serfdom.” Economically, he was not as liberal as a lot of people think.

The real problem with him was that he handed a mechanism to the left to spend money from the public treasury and claim they were “managing” the economy. This was of course far too tempting for 90% of government officials.

Excellent article about Keynes from the 1981 issue of the American Spectator. (That’s right. Way back during the Reagan Administration.)

The Involuntary Unemployment of John Maynard Keynes

tom on June 4, 2012 at 7:20 PM

Thank you tom for the link.

First, Keynes was simply being collegial in his comment. That is neither here nor there.

More importantly, Keynes says right there near the end of the General Theory that he wants the outright socialization of investment decisions. Keynes was a liberal but a central planner, not of the authoritarian variety, as Skidelsky rightly points out.

AshleyTKing on June 4, 2012 at 10:37 PM

Allah is the most over-thinking, emotionally-exhausting pundit I have ever endured. Why do I come back?

leftnomore on June 4, 2012 at 11:06 PM

What about YOUR DNC blog, Willardbot?

Dunedainn on June 4, 2012 at 9:57 PM

LOL that is what I thought you were.

I am the Romney is the Supercharged version of Obama.

I detest Romney, Obama and all other Marxist.

Steveangell on June 4, 2012 at 11:35 PM

if you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%. That is by definition throwing us into recession or depression

This by definition is what we call being wrong. If the government instead of spending that trillion dollars insteads gives it back to the people to spend how they see fit it does not “by definition ” mean a 5% cut to GDP. In facteven if the government stops borrowing that trillion dollars it will free up capital to be invested into the economy for economic reasons instead of political reasons. Mitt is the same as Obama he really believes that government spending is keeping us out of a recession when it is the misallocation of funds by government spending that is keeping us stagnate. the only way Mitt could be quasi-right is if the government is magically creating that Trillion dollars out of thin air via printing presses and still when you factor in how that creation of magical money would depress consumer activity as people are forced to spend mor eon basic goods like gas and food instead of consumer products he is still wrong.

Meet the new boss the same as the old boss.

unseen on June 5, 2012 at 12:07 AM

people should keep their own money and spend it the way they see fit which will stimulate money the just, American way. When people like Obama and Romney get their hands on the money, they give it to their cronies. Keynesianism is a con game!
FloatingRock on June 4, 2012 at 5:50 PM
That’s classic Keynsian policy in a recession- let people keep their own money (via lower taxes) and decide how to spend it.
bayam on June 4, 2012 at 6:07 PM

Real Keynsian policies aren’t applied – they call for a balanced budget and building a surplus during the good economic years. Liberals like to trot out Keynes as an excuse to increase spending or to fend off simple deceased in the rate of spending increases.

gwelf on June 5, 2012 at 12:08 AM

i think you probably both agree on that. i think his point is because the friggin tentacles of the bloated leviathan have so infected every sector of the economy, and created so many in the dependency class, by ripping the alien off the economys face (quickly) would severely damage the host. so ease it off slowly, and hope it didnt lay an egg in your stomach. like that.

t8stlikchkn on June 4, 2012 at 6:39 PM

My RINO credentials are well-established. But I hope that Romney cuts the hell out of government spending as soon as he is President. Yes, we will lose the 2014 elections. It’s no big deal, because the prosperity come 2016 will lead to GOP victories everywhere.

thuja on June 5, 2012 at 12:29 AM

Romney supported TARP, not because he’s a Keynesian, but because he supports both economic and military intervention. Both of which will bankrupt us in short order. Good job in picking your candidate, GOP.

fatlibertarianinokc on June 5, 2012 at 1:57 AM

That’s classic Keynsian policy in a recession- let people keep their own money (via lower taxes) and decide how to spend it.
bayam on June 4, 2012 at 6:07 PM

About the first time I ever heard a democrat/leftist claim lower taxes was Keynesian. Last time I checked, we are in a recession (or damn close to) and every leftist is calling for tax increases. Which they always do.

But, regardless, no leftist is a Keynesian. Keynes calls for low taxes and low spending during good times – something that is anathema to the left. So, like always, you are dishonest. You don’t believe in Keynes, you believe in Marx – tax at as much as you can and let the gov’t control everything always. You just use Keynes for cover.

Monkeytoe on June 5, 2012 at 7:59 AM

My RINO credentials are well-established. But I hope that Romney cuts the hell out of government spending as soon as he is President. Yes, we will lose the 2014 elections. It’s no big deal, because the prosperity come 2016 will lead to GOP victories everywhere.

thuja on June 5, 2012 at 12:29 AM

i hope so too. i am just afraid he wont. i am placing my bet on the GOP congress. to keep him honest and ram the cuts down his throat. a budget reconcil act thats going to be a whopper. i hope they are working on drafting it now. perhaps including all the tax changes, o-care repeal (if even needed), and some “severly” conservative cuts to discretionary, as well as the ryan approach to entitlements. if they can sprinkle in some regulatory rollback (which may not be possible if bud rec process is used) would also be nice. and if they could roll it out in feb/march, rather than may (or july or sept) it would be beneficial for all of us. the sooner the better. timing depends on what happens in the lame duck i guess, how much is just kicked down the road (AMT patch, rates, soc sec rate gimmick) and for how long. i hope they only do it for 3 or 4 months (and not 12 months) to force a budget reconcil early in 2013. i just hope that bt sept/oct when they (finally, apparently the establishment is last to know everything going on outside the beltway)) know they will win, they get all this started and ready.

t8stlikchkn on June 5, 2012 at 8:32 AM

Romney supported TARP, not because he’s a Keynesian, but because he supports both economic and military intervention. Both of which will bankrupt us in short order. Good job in picking your candidate, GOP.

fatlibertarianinokc on June 5, 2012 at 1:57 AM

Nailed it. Such economic ‘intervention’ suits the closet-liberal GOP, and military ‘intervention’ draws the windup tin soldier NeoCons like flies to honey.

It’s a great combination for winning elections, but a d@mn lousy one for running the nation.

MelonCollie on June 5, 2012 at 10:01 AM

Keynesian economics only works in a collectivist environment, duh.

Keynes admitted it to FDR in a letter that still exists when FDR wrote complaining to him that he had been stimulating the economy for 7 years and nothing had changed.

That’s what wrong with Etch-a-sketch. He isn’t as much a socialist as Dumb-Ø but he is one just the same.

There is a reason why only 19% of Americans are satisfied with an Etch-a-sketch or Dumb-Ø as POTUS. Their crony capitalism stinks on ice!

No to Etch-a-sketch and Dumb-Ø.

Jayrae on June 5, 2012 at 11:19 AM

FloatingRock

yes, her own CYA vanity

maverick muse on June 5, 2012 at 1:24 PM

This is why I will not be voting for Romney. He is a Keynsian, he did sign RomneyCare in Massachusetts, he is a bad choice. His nomination is the nomination the the infamous “Republican Next Man in Line.” There will be no change, and I am not sure he will, in fact, repeal ObamaCare. And my friends, forget about Reagan, he never saw a budget he could veto. Look back to Goldwater for your ideology. Otherwise you are just another “Me too Republican” that we have fighting since the forties.

georgeofthedesert on June 5, 2012 at 6:12 PM

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