From the New York Times: How the U.S. Lost Out on iPhone Work
By CHARLES DUHIGG and KEITH BRADSHER, 1/21/12

Charles Wolf writes in The Weekly Standard,  Where Keynes Went Wrong- What if government spending depresses instead of stimulates? 11/7/11

Excerpt:

Keynes assumed that the initial deficient level of aggregate demand would remain unchanged until the stimulative (“pump-priming”) effect of additional government spending kicked in. In other words, increased government spending, or its anticipation, would not further diminish pre-existing levels of consumer demand and investment demand. However, Keynes’s failure to consider the possibility of an adverse effect from government spending — that it might lead to still further decay in the prior levels of consumption and investment — was a fundamental flaw in the theory.

So how might government spending actually undermine its explicit purpose of boosting aggregate demand?

It is quite plausible that the behavior of consumers and investors might change as an unintended consequence of the increased government spending, and might do so in ways that would partly, fully, or even more than fully offset the attempted effort to raise aggregate demand.

That prior consumption demand might actually have been reduced as a result of recent government stimulus spending is suggested by two indicators: Since mid-2009, household savings increased by 2-3 percent of GDP, and household debt decreased by 8.6 percent ($1.1 trillion).

It is also plausible that investment demand might shrink as a result of increased government spending or its anticipation. This diminution might occur if investors have recourse to other investment opportunities that seem more profitable or less risky than those that would accompany or follow the attempted government stimulus. For example, such opportunities might lie in investing abroad where tax liabilities are less onerous, rather than investing at home; or investors might choose to invest in long-term instruments (30-year U.S. government bonds) while reducing investment in fixed capital or equities. These opportunities might seem rosier because of anticipated increases in future taxes, or because of increased regulatory restrictions that might (and did) accompany the increased government spending. In fact, such alternative investment opportunities are much more numerous and accessible now than in Keynes’s era.

HKO comment:

The stimulus effect performed poorly during the Great Depression, and is performing even worse during this recession.  There are other changes that impact this idea.  More Americans are investors as a result of the popularity of 401k’s and the requirement that they have a say in how their money is deployed.  Few people during the Great Depression had the level of mortgage and credit card debt they have today.

In addition to the expectation of higher taxes there is an accumulation effect of regulations that have stifled business investment.  Paying down debt reduces consumption, but it leaves us stronger.  It is a correction of the unsustainable stimulus we experienced from excessive debt.  We deluded ourselves to believe this time was different.

The author also noted that since income taxes were so low during the 1930’s a tax cut as a stimulus was not a viable option.  Today it is.

The obsession with Keynesian stimulus ignores significant differences in our modern economy and culture.  It is foolish to think it will work this time; especially when it failed the first time.  It is debatable whether it has ever worked.

Occasionally I get soundly rebuked from a reader who calls BS on my moniker ‘ Beyond Left and Right’.  Clearly they contend that I am most often conservative and why don’t  I just fess up and admit it.  I thought it may save time if I respond to this once.

First I find many positions held by so called ‘conservatives’ unpalatable.  I supported the Ground Zero Mosque,  because we either have religious freedom or we don’t.  We do not experience freedom only when it is inoffensive.  I am skeptical of simplistic solutions whether it is the Balanced Budget Amendment, a return to the gold standard, or harsh immigration reform.  Tort reform or mandatory sentencing is an intrusion into many sacred courtroom procedures.  The Courts should rule on laws, not create them; but likewise, the legislature should not be adjudicating cases they have never heard.  Our legal system has specific officials placed to exercise judgment.  They are called judges.

I tend to think like an economist and I do not find that sound economic principles are party specific. Calvin Coolidge, John Kennedy, Ronald Reagan and Bill Clinton all cut taxes and increased revenues as a result.  (Clinton raised income taxes and cut taxes on dividends and capital gains- a strategy that would generally be associated with the GOP.)  Richard Nixon devalued the dollar and used prices controls, Johnson overspent on an expensive war and the war on poverty, a similar criticism as the one leveled at George W. Bush.

Even the words ‘liberal’ and ‘conservative’ themselves have changed.  When Hayek first published his Road to Serfdom in the United States he included a forward to address the difference in the use of the word ‘liberal’.  The Classical Liberal of Europe believed in small government and individual freedom. Liberal , as commonly used in America today, has come to be more aligned with a large government largely engaged in redistribution.

But I stand behind the position, ‘Beyond Left and Right’,  for several  reasons.  Most people I find do not readily fit a binary description, but some will seek to determine the political ID marker before they consider the idea.  An idea is acceptable more because of who said it than what is said.

It is my contention that ideas should stand on their own merits.  If an idea has to properly fit a label before you can consider it there are probably millions of other blogs you would be happier reading.  While I welcome corrections, intelligent comments and criticisms, I do not accept name calling, negative presumptions, or personal accusations, , and will simply delete such comments and followers.  I do not engage in arguments or debates online.

I do not claim to be fair and balanced, nor do I seek to give equal time to an idea just because it is the opposite of the one that I propose or support.  Just because I think that the earth revolves around the sun does not mean that I am narrow minded if I do not consider with an equal number of words a proposition that the sun revolves around the earth.

While I have clearly stated opposition to the current president and his administration, it is because I think his policies are awful and counterproductive.  I totally reject accusations that my opposition makes me a racist. I find such shallow accusations a reflection of an intellectual vacuum.  When there is no logical argument left to make the racism charge is the next step.

This blog is simply a notebook where I record ideas and observations, mine and many others, that I think are worthwhile.  Thanks to all the old and new readers and I welcome your comments.

PS: I use the Rebel Yid Facebook Fan Page to bookmark worthy articles as I find them. Sometimes I later incorporate those items into blog posts, but often I do not.  You will therefore find additional postings on the Facebook page than you will in the blog itself.

The Occupy Wall Street felt the need to develop a new way of communicating in crowds:

Of course a new method of communicating does not mean they have anything meaningful to say.  A more detailed  explanation of the hand signals:

But even with this new ‘natural’ means of communication it seems they take forever to reach a conclusions. Here Civil Rights icon John Lewis is denied the right to speak.

He doesn’t realize how fortunate he was.  Can you imagine having the crowd repeat every phrase.

Of course some just have no problem just being genuine assholes.