Obama Proves Keynes Was Wrong

Columnist Paul Krugman is the theologian of the progressive movement, providing a patina of academic legitimacy to economic policies with fancy names that simply seize income and resources from some citizens in order to transfer them to others.   Krugman published a column on New Years Eve called Keynes Was Right” wherein he argues – astonishingly – that President Obama’s massive increases in spending and debt failed to bring about the promised job growth and prosperity because…[drum roll]…they weren’t massive enough!

Hopefully someone will show Mr. Krugman the data displayed in this chart.  [continued below the chart]

Of all the recession/recovery cycles over the past five decades the Obama spending surge was by far the largest, 303% more than the second largest increase in 2002.  Yet the current, post-recession growth in private sector jobs turns out to be the smallest.  The second smallest coincided with the second largest spending increase.  In stark contradiction with Krugman/Keynesian dogma there was greater job growth in the 1960-62 cycle in the face of spending cuts than in the current cycle with it’s unprecedented increase.

Krugman claims that “those of us who did the math knew right from the beginning” knew that the Obama spending binge was “halfhearted,” and not nearly enough.  But he offers no statistical record to support his assertion that the American economy would have grown more rapidly had government spending surged even more.

Krgman is right about one thing:

President Barack Obama has finally gone back to fighting against premature austerity — and he seems to be winning the political battle.

Spending in 2011 went up, not down, in spite of all the fury over debt ceilings and possible shut-downs.  There are no plans for spending cuts in 2012 or any future year.  The political establishment has made Obama’s towering spending the new “baseline” or the floor upon which, according to the government’s loony budgeting processes, future annual increases will be built every year, forever, or until the world is no longer willing to loan America any money and hyper inflation prevents the Federal Reserve from creating any more money.

Astoundingly Krugman tries to portray himself and other Keynesian believers as the underdogs:

In declaring Keynesian economics vindicated, I am, of course, at odds with conventional wisdom.

This is so absurd it’s comical!  The political-media conventional wisdom is, if nothing else, nearly unanimous in the assertion that government spending, especially deficit spending “stimulates” prosperity and job creation.  Conventional Wisdom authored the Obama stimulus with it’s promise of thousands of “shovel ready projects” that would sop up all of America’s surplus construction workers, filling their pockets with cash which they would shower upon the rest of us, creating 3-4 million new jobs immediately and driving unemployment below 6% by the end of 2011.

Krugman concludes with a bit of sarcasm:

One of these years we might actually end up taking Keynes’ advice, which is every bit as valid now as it was 75 years ago.

Where, Mr. Krugman is there any data to back up your sarcasm?  Please show us some examples of U.S. government borrowing and spending escalation that was even larger than Obama’s 2009-11 tsunami, that brought about full employment and prosperity?  We’re waiting.

Everyone agrees that small businesses are the primary source of new jobs in America.  Most Americans would oppose tax increases on small business at the very moment when job creation is critical. Against this backdrop President Obama has introduced legislation he calls “The American Jobs Act” that purports to help small businesses.  So what does he propose to help small business succeed?

  • A one year (2012) reduction in the employer’s share of the Social Security payroll tax from 6.2% to 3.1%.
  • Zero employer payroll taxes on the wages of new employees hired during 2012.  This tax break wold expire at the end of 2012.
  • A tax credit for hiring new employees in 2012, but only if they have been unemployed for over six months.

If a small business owner wants to expand and has the resources to hire additional employees these ideas will save him some money in 2012.  But in 2013 – after the election – the most successful small businesses those with the resources to create jobs, will be hit with the payback.

First, is a tax hike on those earning those Obama calls “the most fortunate among us,” those earning over $200,000.  The top two tax bracket rates would increase from 33% and 35% to 36% and 39.6%.  Then, there’s the

 

When President Obama introduced his with a classic political straddle:

Nobody wants to punish success in America. What’s great about this country is our belief that anyone can make it and everybody should be able to try -– the idea that any one of us can open a business or have an idea and make us millionaires or billionaires. This is the land of opportunity. That’s great. All I’m saying is that those who have done well, including me, should pay our fair share in taxes to contribute to the nation that made our success possible. We shouldn’t get a better deal than ordinary families get.

In other words, don’t accuse me of wanting to punish success even though I seek to increase the tax on success.  The President carefully avoided proposing any specific tax rate on “those who have done well.”  His 80 page “Plan for Economic Growth and Deficit Reduction” calls for “tax reform.”  Tax reform should mean stripping simplification and lower tax rates to encourage private sector prosperity.  But

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