Economic Thought

While reading through MarketWatch.com, I came across an article (http://www.marketwatch.com/news/story/UKs-Brown-pushes-global-tax/story.aspx?guid=%7B7D0FFEDF%2DD3A6%2D4942%2DB2DD%2D5C37CDB6253E%7D) where England's Prime Minister is calling for tax cuts world-wide. In the margin of the article, I found this quote from Douglas McWilliams of the Center for Economic and Business Research:

"'The emerging evidence is that the position in the U.K. is so bad that it cannot be resolved without Keynesian"

I think this would be a great opportunity to dive into the abyss of Keynesian Economics.

John Maynard Keynes was a British economist that valued the interventionism of government during adverse economic times. Sounds all-to familiar, I know. Keynes would argue that government intervention is absolutely essential to the survival of a down-trodden economy. The government should drive the economy, raise taxes, spend money, and redistribute wealth. While the United States was in the throws of the Great Depression, FDR and his economists proposed massive government programs in an attempt to bring us from the "conservative" side of economics to the "liberal" side of economics. As we can see by the last election, Keynesian Economics is alive and well.

Keynesian Economics appeals mostly to the emotions. Any freedom loving person wouldn't logically come to the same conclusion Keynes came too. When the government drives the economy, there is virtually no competition and therefore, no desire to produce better products. When taxes are raised, it takes money out of the hands of those who spend it in the economy. When the government focuses on spending money, they run the risk of bankrupting their precious social programs they think are so important. When wealth is redistributed, it destroys morale and the incentive to work.

Perhaps the greatest example of Economic Theory is Reaganomics. Reaganomics operated under four main principles, namely: reduce the growth of government spending; reduce taxes; reduce government regulation of the economy; and reducing inflation by controlling the money supply. If you reduce the government spending, it means eliminating social programs that aren't Constitutional. If you lower taxes, you give the citizens, the contributors of the economy, more power and more influence for growth. When you get the government out of the economy, it allows the Market forces of Competition and Supply and Demand to dictate what happens. When the money supply is controlled, we wouldn't experience abscess inflation and the devaluation of money.

Keynesian economies favor the government. Reagan economies favor the people. The question is, why then, if the Congress says they are for the people, are they passing bailout measures for the economy?--Election year politics, my friend. What votes they can't win honestly, they'll buy at any cost--even if that cost means the future destruction of our economy. The weaker our economy is, the more benevolent our government appears to be, thus proving the general path of the Federal Government--which is to strive for power, not to love freedom.