The Keynesians Have Lost
Yesterday was a very bad day for the economy and country: our window for stimulating the economy this year (it won’t have an empirical effect until next January) is fast closing, and a variety of factors have hamstrung Congress and the Executive into an inability to even stop the bleeding, if those idiots on the Hill in fact cut or let unemployment benefits expire while crushing State budgets with no Medicaid help it’s outright economic regression. Hoover smiles.
Most debilitating of negative variables in this insanity is, surprisingly, the modern economic profession and culture itself, the basic and easily understood Keynesian remedies for depression or recession had been—it was assumed—to have been widely accepted and agreed upon for 4 generations: with monetary policy at the full throttle and the private sector stalled the only solution is massive sustained social spending to spur demand. Nobel laureate Krugman was scathing yesterday in his contempt for the useless intellectual vomit of modern economics currently embraced by so many governments that will lead us to a “lost decade.” The Keynesians are basely bewildered, they have all the intellectual econ models and facts on their side and they still lost.
Krugman rightly notes that if the remedy models and intellectual logic is easy the human brain evolution of implementing them is decidedly not, Keynesian economics is plainly counter-intuitive and only those educated and trained properly in implementing the response will do so. After 80 years of mind games the Econ social science community was grossly unprepared for the depression event (now) when it came, it couldn’t come close to a clear correct unified simple response, that Krugman makes woefully clear.
It’s very important another element to this counter-intuitiveness be noted: social spending in the United States faces serious political racial and sexist restraints, it’s a major reason we have hellish slums in every city, a horrific 20% poverty rate among our children, an unofficial 20% unemployment rate, no health care and no trains. Not only must our political actors overcome the basic Econ counter-intuitiveness of depression remedy, they must then immediately pivot to push back on old racial and sexist forces. This, too, can be very difficult and unfortunately the empirical record of 2008-2010 social spending so tragically bears the record of Keynesian failure.
Now that we’re here two relevant observations bear noting, the first that—as Brothers Herbert and Krugman and bloggers Digby and Atrios keep saying—we’re in a classic case of psychotic social denial. 20 years ago an official 10% unemployment rate would have merited a heavy political response, rightly so, but apologists with appalling obtuseness cling to illusory GDP numbers from a puny 2008 stimulus remedy, the unemployed are increasingly demonized as lazy, and our ability to turn a blind eye to the acute human suffering and terrible social implications to the poverty of our children is beyond appalling.
The second is that I hope the Econ culture and profession get its act together as quickly as possible. Out of all the social sciences they held the most simple models and remedy possessing the greatest responsibility, I held you in the greatest esteem and admiration, and y’all performed a face splat for the ages. If you don’t now, very soon the consequence and responsibility for your grossly immature community will crash down upon us all, perhaps then acceptance of failure will sink in. Way to go, guys.
I’m not, obviously, a Nobel laureate (heh), I’m under no heavy constraints at all in describing the results of all this in such a vague and careful term as a “lost decade” (as a big-time actor in many circles Krugman has a severe duty constraint not to forecast doom, lest he actively spur it forward, half of recession remedy economics is a mind game of confidence and faith). Great Recession Part II, or the New Depression, perhaps? Whatever the final moniker of denial, howling pain and regression for our little people on a scale we have never empirically seen before is soon upon us, all the more severe if those socially lunatic Republicans take a branch or all of Congress this Fall.
As the window of Keynesian opportunity quickly closes around us I am only left with a plaintive plea to our political leadership: please, please stop beating up the little people. These vicious militaristic racial econ social games have left us with nothing since Reagan, there has to be a terrible breaking point of no return to the America we expect for all of us with no social spending, why take the immense risks? Why be oblivious to all the pain? The odds of something immensely terrible happening grow by the hour, we still have a little time left not to take this monstrously wrong path.