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Aug 28, 2011

Basic Principle of the New Deal

President:  We will now pivot and act resolutely to overcome the serious problems presented to us in these past months and years.

Reporter:  What is your plan?
President:  We will be resolute in our various policies.

Reporter:  Can you give some examples?
President:  Each problem will be solved as required, with a solution tailored to each situation.

Reporter:  Then, what is your guiding principle?
President:  Our principles will emerge as we solve each problem in turn.

Reporter:  I see. You are a big picture, idea type of leader.
President:  Yes. I would not want to limit our problem solving by committing prematurely to particulars.

"Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Meaning" by Jonah Goldberg   (via Ed Driscoll)

[edited]  Today in 2007, many liberals subscribe to the myth that the New Deal was a coherent, enlightened, unified endeavor encapsulated in the largely meaningless phrase “the Roosevelt legacy”.

This is poppycock. Raymond Moley was FDR’s right-hand man during much of the New Deal:

To look upon these programs as the result of a unified plan was to believe that the accumulation of stuffed snakes, baseball pictures, school flags, old tennis shoes, carpenter’s tools, geometry books, and chemistry sets in a boy’s bedroom could have been put there by an interior decorator.

Alvin Hansen was an influential economic adviser to FDR. He was asked in 1940 whether the basic principle of the New Deal was economically sound, and he responded, “I really do not know what the basic principle of the New Deal is.”

Aug 2, 2011

Free Ice Cream Cones

Fred:  You have a nice coffee maker there.
Mike:  It's great. It was expensive, but they gave me a coupon for $40 off which I couldn't pass up.

Fred:  But, you are not smiling.
Mike:  Funny thing. I saw one later, just like it. No coupon, but the base price was even less than I paid in total.

Fred:  Coupons are funny that way.

A political gathering in the US.

Politician on outdoor stage:  May I first say that all of you are the most intelligent, beautiful, clear thinking, generous, patriotic, and deserving people that I have met, along with all of the other great people of your town, city, and state.

Voice in the Crowd:  Yeah, whatever.

Politician:  Unlike my opponent, I want to strengthen government in all of the right ways to help you in this life of woe.

Voice:  What about the debt?

Politician:  "Debt"  is only a bad word for borrowing money. It is money that someone has little use for, which we will invest in our great country for your benefit.

Voice:  What benefit?

Politician:  Ice cream cones.

Voice:  Are you nuts?

Politician:  Which of you wonderful people would like a free ice cream cone?

Voice:  [drowned out]

Crowd:  [clapping]  Me, Us, We do, Yeah, Great.

Politician:  I will arrange for free ice cream cones, as many as you want, and other free stuff. Would you like that?

Voice:  [drowned out]

Crowd:  [loud cheers]  Yay, Yes, You said it, Gimme, I can't wait.

Voice:  [as cheering dies down]  There is no such thing as a free lunch.

Crowd:  [some booing]

Politician:  My friends, the heckler is correct. But we are not talking about lunch. We are talking about free ice cream cones.

Crowd:  [louder cheering]

Voice:  [as cheering dies down]  They will make us all pay more.

Politician:  No, we will make the rich pay. They have lots of money. In these times, when we have fewer ice cream cones than we want, it is only fair that rich people and corporations put in their fair share, much more than they are putting in now.

Voice:  [stands on park bench]  Wait! You all will pay more.

Taxes on companies will appear as higher prices. Taxes on investments will slow company growth. You and your children will have fewer and lower paying jobs.

The politicians always take a big cut. Your retirement funds will not grow as fast, as everyone invests less. The same corrupt politicians who promise to tax the rich will make deals with the rich and pass the costs onto you.

This has always been the result of promising free stuff and promising to tax the rich.  [he shouts louder]  You are being asked to vote away your own prosperity!

Crowd:  [some boos, and a stunned silence as people try to think]

Politician:  My fellow citizens. I will get you free ice cream cones. We will all work together and contribute our fair shares. Keep your faith and vote for a better future.

Voice:  [the man is pulled down from the bench]  Stop that. Let go.

Crowd:  [loud cheers toward the stage]  Yes. You're the man. We're for you. We deserve the ice cream cones.

Aug 1, 2011

Keynes' Brilliant Moment

Fred:  Keynes proposed that everyone would have a job if the government would print more money and distribute it widely.
Mike:  Distribute it to me, and I wouldn't have to work.

A lost recording, England 1932:

Keynes:  There must be a way to end this depression. Along the way, we can show that government can be good, and business is bad.

Assistant:  How to do it?

Keynes:  I have it! There is not enough demand for goods and services. Something changed, and people stopped wanting enough stuff. They became suddenly and disastrously frugal, and no longer want to buy things.

Assistant:  With a raise, I would buy more things.

Keynes:  Forget the raise. If only we could find Martians who would buy more of our stuff, then people would work for the Martians. The increased demand would get money flowing, like a river, and we would all be rich.

Assistant:  Sir, we had a long talk about the Martians. We have gone over that.

Keynes:  OK, yes, no Martians. Where else can we get demand?

Assistant:  How about the French and Germans?

Keynes:  They are not rich enough. They are still progessing toward wealth through adaptation to Socialism, and they haven't yet adapted. They have this stupid notion that they should sell more of their stuff to us, not buy more stuff from us.

Assistant:  If you and I both had more money, we could buy things and help to raise demand.

Keynes:  More money? Eureka! The government can print up the stuff and spread it around. And, I can get more money by advising the government. The workers will chase those pieces of paper like catnip. They will become used to working again, instead of being lazy and stupid.

Assistant:  More people may find work. But Sir, the value of money will fall and prices will go up. Everyone now working and saving will be silently taxed to employ those extra people. And, what will happen when the stimulus stops?

Keynes:  First, we and our friends in government will all have more money. That has to be a very good thing. Second, in the long run we are all dead. Forget about tomorrow, it is in the future.

Assistant:  So, I get my raise?

- -
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"Keynesian Economics" in The Political Dictionary
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Econ 201: The Myth of the Economic Multiplier
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Collecting $1 in extra tax kills $2 in production.

A Short Argument Against Stimulus
It isn't so stimulating when you know that it must be paid back.

Let's Counterfeit Our Way to Wealth
If Obama and Keynes are correct, that there is a 1.5 wealth multiplier on spending, then $100 in spending produces $150 in wealth, and we should all benefit from counterfeiting. It is not my fault that the belief in a multiplier is so outrageous that it leads to this outrageous result.