Human Events Blog

The Death of Keynesian Economics: Comparing Reagan to Obama

It’s time to give Keynesian socialism a proper burial. It doesn’t work. It never did.  Big government socialism only brings on more debt, waste and suffering.

For proof look at Europe. This week the Portuguese Finance Minister even admitted the stimulus failed. Forbes reported:

President Obama imposed a big-spending faux stimulus program on the economy back in 2009, claiming that the government needed to squander about $800 billion to keep the unemployment rate from rising above 8 percent. How did that work out? One possible description is that the so-called stimulus became a festering pile of manure. About three years have passed, and the joblessness rate hasn’t dropped below 8 percent. But the White House has been sprinkling perfume on that pile of you-know-what and claiming that the Keynesian spending binge was good policy. But not every politician is blindly ideological like Obama. Vitor Gaspar, Portugal’s Finance Minister, is willing to admit error. Here are some relevant excerpts from a New York Times report.

Mr. Gaspar, speaking to The New York Times last week, has a message for observers who say Europe needs to substantially relax its austerity approach: We tried stimulus and it backfired. Like some other European countries, Portugal tried what Mr. Gaspar called “a Keynesian style expansion” in 2008, referring to a theory by economist John Maynard Keynes. But it didn’t turn things around, and may have made things worse.

Why does the Portuguese Finance Minister have this view? Well, for the simple reason that the economy got worse and more spending put his country in a deeper fiscal ditch.

Yesterday we were slammed with further proof that Keynesian economics is a bust. The government reported that the first quarter GDP this year dropped to 2.2 percent.

The Obama-Pelosi regime bet the farm (and a trillion taxpayer dollars!) on a big government Keynesian stimulus package and it failed.

Back in 1980 during a similar economic downturn President Ronald Reagan took the exact opposite approach as Barack Obama. Reagan cut taxes and regulations. When Reagan signed the Economic Recovery Act at his ranch in 1981, it was the largest tax cut in American history. And it was a massive success. Jobs were created. In 15 months in 1983-84 job growth was 4,655,000, while in the comparable 15 months in 2011-12 it was 2,475,000, just a little more than half as many. The average GDP during Ronald Reagan’s 4th year in office was a whopping 7.75%. Via Trading Economics Obviously, Barack Obama has much to learn from Reagan. But he won’t. He’s too much of an ideologue. And, we will all suffer because of it.

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