Will Obama’s failure to create genuine wealth finally end Keynesian economics?

Many of Obama’s most educated supporters believe in him because they believe in Keynesian economics.  Central to that belief is the theory that government itself can be an economic engine.  If people aren’t working, have them work for the government or at least have the government fund their ostensibly “private sector” jobs.  This theory holds that all jobs are good jobs, regardless of the employer.  Indeed, ardent Keynesians say the government is both the best employer and economic manager, because it’s big enough to control the entire economy, getting money and jobs where they most need to be.

I turned my back on Keynesian theories when I finally figured out that there’s a difference between jobs and wealth.  As Milton Friedman famously said, if all that you’re interested in is employment, forget shovel-ready jobs and aim, instead, for spoon-ready jobs, which will put more people to work.  At the end of the day, whether you have ten people with digging away with shovels or one hundred people picking away with spoons, all you’ll end up with are holes.  Under this model, any benefits from fuller employment are transitory.

What creates meaningful jobs, the kind that move the economy forward instead of create a static back-and-forth of taxes to the government and make-work to the people, is a dynamic private sector.  That’s where you get innovation, imagination, and energy.  Under this free-market economic model, the government’s job is to prevent abuse.  It steps aside to allow the greed that’s necessary for capitalism, while acting affirmatively to prevent fraud, abuse, and other kinds of things that interfere with the marketplace.

During the debate, Romney was referring to this policing role when he said some regulation is not only good, but actually necessary.  It’s when the government starts managing the economy that wealth vanishes.

If you have a rich country (or, as was the case with Europe when America paid for her Cold War security, a sugar daddy), you can keep the back-and-forth of taxes and government make-work going for quite a long time.  Eventually, though, you’re left with jobs, but no wealth.  And no wealth means no taxes, which means no jobs.  Welcome to Greece.

What Romney has to do during the next month is convince undecided voters, or worried voters who aren’t as decided as they thought they were, that, while, Obama’s policies can and will create jobs (as today’s anemic, and suspect, job reports revealed), his policies not only cannot create wealth, they are antithetical to wealth creation.  I think this ad is a good start:

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  • Robert Arvanitis

    Do the facts now bury “Keynesian economics” conclusively?  Yes.
    Will we inevitably see efforts to resurrect “Keynesian economics?”   Again yes.
    The various left schemes are simply proof of unquenchable appetite for power, and any plausible excuse will be recycled, so long as there are gullible among us.
    (Perhaps readers would be interested in a paper on the increasing sophistication of “tax-and-spend” vote-buying schemes.  It’s quite instructive and explains everything from tax deductions to Obamacare, and Social Security in-between.)

  • JKB

    Hate to say it but Keynesian economics is like Dracula, it just won’t die.  When exposed to the light, it burns and runs and hides but after a few years in the ground it is back with a vengeance.

    Just this morning I was watching Uncommon Knowledge with George Gilder  It is must see, Gilder is the author of Wealth and Poverty which was used as something of a handbook by the Reagan administration.  And guess what we had 25 years of growth in American assets with the subsequent improvement in wealth for all who embraced it.  We could again.  

    It’s an excellent talk and he’s updated Wealth and Poverty for the 21st century.  The excerpt quotes they’ve used on The Corner are not the best parts.  

    If you’ve any doubts about capitalism, listen to the discussion, they’ll be put to bed.  I like best that Gilder points out capitalists are in many ways altruistic as they can do nothing without considering the desires and wants of others.  Crony capitalism, the stock and trade of the Obama administration, is greed. 

  • Danny Lemieux

    I agree. The fatal conceit of the Left is the belief that they have the intellect to “fix” the world the way it should be fixed. Keynesian economics (which even Keynes disavowed just before his death) provides them with the rationale and illusion that they can be Masters of the Universe.

  • http://photoncourier.blogspot.com David Foster

    The elevator safety and economic development act would create at least 1,000,000 jobs, and would do so at no cost to the Federal Government.

    It is entirely consistent with Obama’s economic worldview and that of most Congressional Democrats.

    Indeed, Obama could proabably establish these rules through pure administrative action.

    What is he waiting for?


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  • http://OgBlog.net Earl

    Read these lines from Heinlein and then answer the question:

    October 6, 2012


    Political tags – such as royalist, communist, democrat, populist, fascist, liberal, conservative, and so forth – are never basic criteria. The human race divides politically into those who want people to be controlled and those who have no such desire.
    Robert A. Heinlein

    Posted by Sarah Hoyt at 1:00 am
    @David Foster:  STOP IT!!  We know this is the way the man thinks, already (automatic tellers, airline kiosks, etc.) and he doesn’t need any more ideas!!

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