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There will never be an end to Keynesian economics. Just, perhaps, an end to the Democratic Party’s ability to employ it.

Republicans pretend to disagree with Keynesianism when Democrats are in power, vociferously discouraging its use by harping on the numerous things about both Keynesian monetary and fiscal policy which are counterintuitive to average Americans who do not understand economics. For instance, Republicans during Barack Obama’s presidency have lambasted his fiscal stimulus because it just can’t be right for America to spend money when it’s already in debt, right? I mean $14 trillion’s a big number, right? And Republicans have also blasted any and all monetary stimulus out of the Fed, which is entirely consistent with Republican wishes to have hard money throughout their presidencies, right?

Democrats, on the other hand, are handicapped in that they cannot pretend to disagree with the basic premise of Keynesianism–that government, being the main actor in the US economy, must help along the economy with fiscal and monetary stimulus when it hits a rough patch–during periods of Republican reign. So, when Republicans control the executive branch and/or a branch of Congress and pass stimulative tax cuts or pass stimulative spending bills, Democrats can only disagree with the specific content of those bills, not the underlying premise, which, with an economically illiterate electorate, is a serious tactical handicap.

I’ve written previously about the Reagan administration’s 1981 Kemp-Roth tax cut. To add further to the narrative, I’d like to add William Greider’s perspective from his Secrets of the Temple: How the Federal Reserve Runs the Country. I would quote it, but it makes more sense to show the entirety of a couple of pages. So rich is the content:

So, there you have it. Ronald Reagan’s economic and political teams were completely aware of the fiscal consequences of the 1981 tax cut and chose to hide the analysis from Congress, which was debating the bill. The US barely had a $1 trillion deficit at the time Kemp-Roth passed, and, despite numerous efforts at fiscal retrenchment throughout the rest of the 80’s and into the 90’s, deficits soared.

“…the essence of American politics.  This essence, when distilled, consists of the manipulation of populism by elitism. That elite is most successful which can claim the heartiest allegiance of the fickle crowd; can present itself as most in touch with popular concerns; can anticipate the tides and pulses of opinion; can, in short, be the least apparently ‘elitist’.”

Christopher Hitchens, No One Left To Lie To: The Triangulations of William Jefferson Clinton, p. 18

 

“The wrenching irony of American history was that, while many of the Populist ideas eventually triumphed, the people themselves were utterly defeated.”

William Greider, Secrets of the Temple: How the Federal Reserve Runs the Country, p. 243

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