The Death of Keynesian Economics and the Resurrection of Supply Side Idiocracy
Senator Dick Durbin appears to understand that spending cuts affect the economy in the same way that tax hikes do: they reduce the amount of money going to consumption. Of course, tax hikes on the richest of us have practically no effect on consumption, and if the guy that owns 36 apartment complexes can’t have a new yacht this year, well, that isn’t quite like losing 37 teachers from the Detroit school system, is it?
Now that the idiot class has killed off Keynesian thought, the Idiocracy of the Tea-Zombies is bringing back the stupid tenets of supply-side economics. This is just a euphemism for the economic theories that led to the Great Depression, and now have led to the Lesser Depression. Keynes begins his great work, The General Theory of Employment, Interest. and Money with a discussion of Say’s Law (Prometheus Books, p. 26):
Thus Say;s law, that the aggregate demand price of output as a whole is equal to its aggregate supply price for all volumes of output, is equivalent to the proposition that there is no obstacle to full employment.
He proceeds to show that this is not the case, and that it is perfectly possible for an economy to reach an equilibrium point at much less than full employment. You don’t have to read the proof to understand intuitively that that is the case. We have reached an equilibrium now between demand and supply, but the economy isn’t growing and unemployment is miserably high, and this isn’t the first time that has happened. Say’s Law is unequivocally wrong.
Supply side theory tells us that if government quits regulating and stays out of business, business will grow jobs. That is the essence of classical laissez-faire economics. But that doesn’t explain how cutting regulations and reducing taxes on the decreasing number of people with jobs is going to increase demand. Absent demand, no one will make anything and there won’t be any new jobs. Supply-side economics offers no traction in the situation we are in now. It is just a way to grab the few remaining dollars from the middle class.
The idiots who got us into this gigantic hole have only one solution: keep digging. Maybe we’ll get to China and they will bail us out.