So this is who is in charge of fixing our economy? I mean I knew we had a bunch of monkeys and puppets in Washington BUT are you telling me that a country facing its worst financial crisis since the great depression is relying on a bunch of idealistic political science experts to make the right decision to get us back on track. FCCCKKKKKKKKKKKKKKKKKKK. So really what we have here is a two pronged problem. Current Economic status quo in Washington is based on Keynesian based economics…for those who don’t it’s the most common economic theory applied by most western governments because its foundation is formed by the belief that creating aggregate demand even if artificial, creates economic activity. SO basically, give a politician a blank check and let them go to work has been our policy for just about ever. As you can see this is a politician’s wet dream. Tell your constituents you’ll do this, this, this and voila!! THEY WILL LOVE YOU and VOTE for you. Be forced to restrain spending and VOILA!!! They will hate and replace you….anyone see the flaw here given our precarious times? From wiki:
According to Keynesian theory, some microeconomic-level actions — if taken collectively by a large proportion of individuals and firms — can lead to inefficient aggregate macroeconomic outcomes, wherein the economy operates below its potential output and growth rate. Such a situation had previously been referred to by classical economists as a general glut. There was disagreement among classical economists (some of whom believed in Say’s Law—that “supply creates its own demand“), on whether a general glut was possible. Keynes contended that a general glut would occur when aggregate demand for goods was insufficient, leading to an economic downturn resulting in losses of potential output due to unnecessarily high unemployment, which results from the defensive (or reactive) decisions of the producers. In such a situation, government policies could be used to increase aggregate demand, thus increasing economic activity and reducing unemployment and deflation. Most Keynesians advocate an activist stabilization policy to reduce the amplitude of the business cycle, which they rank among the most serious of economic problems. For example, when the unemployment rate is very high, a government can use a dose of expansionary monetary policy.
On the direct opposite side of the equation is the Austrian School of Economics which I have been following for the past 8 years or so and is the foundation from which I form my collective opinion on economics and which should be no shock to the readers of this blog, is the economic principle followed by Ron Paul and why I support him. Our government is incapable of spending and incapable of making hard choices. The idea behind the Austrian is take those choices away from the government and let the private sector and allow people decide what they want and what is best for society. Austrians argue against centrally planned societies which is what our country and Europe has become.
Austrian economist Friedrich Hayek criticized Keynesian economic policies for what he called their fundamentally collectivist approach, arguing that such theories encourage centralized planning, which leads to malinvestment of capital, which is the cause of business cycles. Hayek also argued that Keynes’ study of the aggregate relations in an economy is fallacious, as recessions are caused by micro-economic factors. Hayek claimed that what starts as temporary governmental fixes usually become permanent and expanding government programs, which stifle the private sector and civil society.
Austrian economists reject empirical statistical methods, natural experiments and constructed experiments as tools applicable to economics, saying that while it is appropriate in the natural sciences where factors can be isolated in laboratory conditions, the actions of human beings are too complex for this “numerical” treatment as passive non-adaptive subjects. Instead one should isolate the logical processes of human action. Mises called this discipline “praxeology” – a term he adapted from Alfred Espinas (but which had been in use by others
Other Austrian school economists have also attacked Keynesian economics. Henry Hazlitt criticized, paragraph by paragraph, Keynes’ General Theory in The Failure of the New Economics.
Murray Rothbard accuses Keynesianism of having “its roots deep in medieval and mercantilist thought.”
Having no business background, no understanding on economic theories and principles it makes sense as to what the de facto school of thought all the sharks in the capitol hill fish tank would swarm to. Having a blank checks for years to make promises and rain gifts on everyone regardless of societal benefit, the ability to grab more and more power and the hubris to believe that one knows what is best for all makes it easy to pray on the weak and powerless. When you are a politician, as long as you spend and hop of board the spend and extend train makes it easy to be well liked and re-elected…but folks that era is coming to an end as this country is broke. Shaping a government that is formed by the right leaders is going to be hard and most likely impossible….but there are leaders out there who can get the job done…and I believe in one. And I think you all know by now who that is.
From The Hill:
Almost 80 percent of lawmakers have no academic background in business or economics, even as Congress grapples with deficits, unemployment and other economic issues of tremendous complexity, according to an independent analysis released Tuesday.
The Employment Policies Institute (EPI) found that only 8.4 percent of lawmakers majored in economics or a related field, while just 13.7 percent studied topics related to business or accounting.
“This research suggests that our elected Representatives may want to dust off their Econ 101 textbook (if they have one) before trying to tackle weighty questions about the impact of taxes, spending, and debt on our economy and the labor market,” EPI’s release warns.
Most Capitol Hill lawmakers (55.7 percent) focused their studies on government, law or the humanities, EPI found, while 11.5 percent majored in science- or technology-related fields.
The report arrives as Congress continues to joust over deficit reduction, spending cuts, tax reform, and the role of the federal government in pulling the country out of a prolonged jobs crisis.
Republicans argue that the size of government – combined with enormous levels of federal spending – have contributed both to the recent recession and the slow pace in pulling out of it. They want to cut taxes, slash spending and scale back regulations they say are strangling private sector job creators.
Democrats, on the other hand, see the government playing an active role in bolstering the economy. They’re pushing proposals designed to create jobs by increasing infrastructure spending, lending a lifeline to states and hiking taxes on corporations that outsource jobs.
Michael Saltsman, a researcher at EPI, was quick to concede that the lack a formal background in economics or business does not automatically preclude lawmakers from making informed choices about economic policy.
“There are plenty of people who have done it well,” Saltsman said.
But given the intricacy of the economic issues lawmakers are tackling this year, a formal introduction to those topics “would certainly help them to evaluate these things better,” Saltsman added.
In crunching its figures, EPI excluded nonvoting members, such as those representing Guam and the District of Columbia. The group also did not take into account those lawmakers without business or economic degrees who nonetheless launched business careers.