Commentary: Keynesian Politics, a Bad Idea That Won’t Go Away

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by William Haupt III


Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.”
– Milton Friedman

Since man is reactionary, we are a society of laws based on attempts to right the sinking ship rather than to craft a seaworthy vessel. During the Great Depression, a dangerous economic theologian emerged. He postulated what elements failed and how to negate future financial crises. In 1936, John Maynard Keynes, an idealistic liberal economist, set out to prove his theory that government could correct everything wrong in society. To Keynes, if government controlled it, it could not be broken. His work is a dark legacy of progressive thinking that created so many struggling economies today.

When the natural synthesis of free markets is disrupted by government, it stifles growth of capital and stimulates socialist thinking. This integer within Keynes illogical socioeconomic equation is the force that defined custodial government. It is the concept employed by politicians today for empire building. These civil dependency platforms are popular since they transfer responsibility from the people to the government. This has been the most pernicious weapon used to exterminate global democracies since the rise and fall of Roosevelt’s progressive empire during the Great Depression.

In a nation with a free market, the competition determines the direction of the economy. Keynes claims, “If the people make decisions that determine their fate, it is impossible for government to effectively manage or control the direction of a society.” But when the people permit government to assume the responsibility for an economy, they must permit them to control their wealth and liberty also. Therefore, it is the people themselves that determine the failure or success of Keynesianism politics, not the government.

“There is no harm in being sometimes wrong.”
– John Maynard Keynes

History has revealed the failure of Keynesian economics and the reality of Keynesian politics. Adolf Hitler was a Keynesian. He suspended the gold standard, created public works programs, stifled all foreign competition, and controlled private sector pricing and production. He socialized healthcare and dictated family planning. He expanded credit, banned gun ownership and federalized all public education. Like a true Keynesian, he financed this with massive deficit spending. The success of his regime was dependent on the people rejecting a capitalist economy and welcoming Keynesianism.

“How fortunate it is for governments that the people they administer don’t think.”
– Adolf Hitler

Keynesian economics has been the Waterloo for democracies for decades. Like a bad habit, once Keynesianism has infected a society, it will continue to haunt it as politicians use it to empower their party. In 2008, the pendulum of bad economic ideas swung in Obama’s favor and opened the door for progressivism. He and his policy cronies sold America the bill of goods, government control was the great equalizer to ensure everyone was provided for. And by over-regulating business and by increasing taxes on the producers, government had the ability to redistribute the nation’s wealth to manage both our social and economic futures. The result would be social harmony and prosperity?

Responding to more than $900 billion in stimulus spending that didn’t work, in a speech to the New York Economic Club in 2014, Treasury Secretary Jack Lew said the U.S. GDP growth rate adjusted for inflation was projected to run about 2 percent a year. That was down significantly from the 3.4 percent average from the end of World War II to 2007. But many economists believed the large growth in disability and food-stamp programs did irreversible damage to the economy. They concluded, if we did not avert to supply vs. demand economics, our economic future was in jeopardy.

“As we move forward, our real GDP growth is likely to be slower but it will be safer due to my policies.”
– Barack Obama

The theory of Keynesianism at first never gained much attention. Compared to capitalism, world economists considered it a backward science. Since the 16th century’s emergence of capitalism, per person income grew more than 2 percent a year. And the average standard of living doubled every 35 years. But the Great Depression gave President Franklin Roosevelt an opportunity to try Keynes controvertible theory. When desperate people traded liberty for federal security, it brought legitimacy to this bad idea. And after World War II, when European nations were rebuilding, many tried to emulate U.S. capitalism. The fatal mistake many made was to incorporate FDR’s Keynesianism into their new governments.

On accepting his Nobel Prize, economist James Buchanan said, “My task has been to ‘uneducate’ economists.” He blamed Keynesianism for our loss of fiscal discipline. He said, “Keynes was wrong thinking budget deficits were unavoidable and they created jobs.” Buchanan claimed tax revenues can’t support current social programs. “It is a political scheme that allows politicians to do what is best for them not the needs of the electorate.” He concluded:

“The national deficit is in the trillions because politicians use Keynes’ reasoning to rationalize deficits for everything.”
– James Buchanan

As state legislative sessions wind down, the evidence of increased Keynesian theologians in state governments is concerning. The wave of self-reliance that grew in reaction to Obama’s federalism is receding. Many states that elected conservative legislatures are backsliding. Eight Republican governorships flipped during the midterms. And many states turned bluer as we watched the GOP lose much of the ground it gained during Obama’s tenure. People have short memories when the economy is great and we have a leader who is not trying to divide us to conquer and control us.

This year, many states wasted entire sessions trying to pass bad laws when we need to pass good ones. With the president and courts leaning in the right direction, and Congress moving no place, we could be cutting the size of government rather than expanding it. States continue to debate feel good laws that increase spending and beg for more federal dollars to pad their budgets. And newly elected politicians are trying to expand state governments on Washington’s dime.

“Politicians are terrified of losing their supporters but are content with government’s failures.”
– Thomas Sowell

Dr. James Buchanan told us, “You cannot have both Keynesianism and capitalism.” And that’s the flaw in Keynes’ theory. Keynesianism is “public choice” economics which does not work in today’s world. Government budgets are not tools for managing the economy. They are only the constraints under which politicians operate. Keynes’ idea, a government managed economy to meet universal popular demands, does not work in the real world since this is not in the politicians’ self-interest. He ignores the collateral damage of identity politics when the politicians pick the winners and losers.

America is in a boom period for the first time since Ronald Reagan was president. Yet far too few realize it; let alone appreciate it. We should be passing laws to maintain this forward momentum not laws to facilitate a return to the failed policies of the past progressive decade. The time to repair your roof is when the sun is shining not when it is raining. Keynesianism is antithetical to capitalism no matter how tempting politicians make it sound. Only those that don’t value their liberty lose faith in American capitalism.

“We can state with conviction, therefore, that a man’s support for absolute government is in direct proportion to the contempt he feels for his country.”
– Alexis de Tocqueville

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William Haupt III is a contributor to The Center Square. He is a retired professional journalist, author, and citizen legislator in California for over 40 years. He got his start working to approve California Proposition 13.





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