Crackpot or not, [John Maynard] Keynes has spawned generations of economists and politicians who think that spending money is the same thing as making money. You might recall Michael Douglas’s character in War of the Roses saying to his wife (played by Kathleen Turner): “It’s a lot easier to spend it than it is to make it, honeybun!” Well, not according Keynesian economists, it isn’t.
That is a great pop summation of the Keynesian economics that underlie a lot of what has recently happened in profligate Washington. It comes from an article entitled “Time to Topple Keynesian Economics.” In a way, that is one of the underlying themes of the rapidly-approaching midterm elections. The public seems to be saying that it doesn’t want to be taxed exorbitantly to support government overspending, honeyun.
The people may be fed up, but the article points out that senior government officials remain wedded to overspending. Secretary of the Treasury Tim Geitner is cited as a fan of overspending. No surprise. That overspending stimulates the economy has been the conventional wisdom since the economist John Kenneth Galbraith popularized this notion in 1958 with his book The Affluent Society.
Keynesian economists believe in the spurious and curious notion that economies are driven by spending rather than by making. To them spending is an economy’s driving force. There are three mutually reinforcing factors at work that promote and sustain this belief. One is the way economics is taught; a second is the formation of a “conventional wisdom” around Keynesian economics; the third is the way the national accounts and macroeconomic modelling “bulletproof” this conventional wisdom against any and every experience.
Yep, the intellectuals may still believe that we need to spend more and more, but the folks who are footing their bills are waking up to economic reality. Look to the campaign trail. We’re tired of being taxed to support Lord Keynes outdated theory.