Given the circumstance we are in, what can be concluded firmly is what this commentator has maintained all along, namely that Keynesianism is a complete and utter failure. Yes, it made many Americans feel like the political class cared about them because it spent so much money on their behalf in an attempt to “stimulate” the economy back to good health. And all the money infused into the economy either by government appropriations, monetized debt, or artificially low interest rates did indeed forestall an economic collapse.
But, like the old Chiffon margarine commercial which warned its viewers that impending doom would befall those that fooled Mother Nature, doom is now ours because Bush, Bernanke, Geithner, Obama and many members of Congress dared to fool the free market.
Naturally, Keynesian diehards will claim that the problem is that not enough money was spent to revive the declining economy. Well, that is an easy out given that more money could always be spent. In any event, more money spent would have probably forestalled the next recession even farther into the future, but it wouldn’t have solved the systemic problems in the economy — namely, price fixing by the Fed, government spending crowding out private investment, and overregulation. In fact, with the spending, we have had an even worse recession than the last is on the horizon; if more money had been spent the next downturn would be that much larger.
The fact of the matter is that since 2008 we have racked up close to $6 trillion more in debt with nothing to show for it. The big spenders responsible will blame the greedy rich who they say do not pay their “fair share” of the tax burden. But, according to the IRS, in 2007 the richest 1 percent earned 22 percent of national income while paying 40 percent of all personal income taxes; the top 5 percent earned 37 percent and paid 61 percent of all income taxes; and the top 10 percent earned 48 percent and paid 71 percent of all income taxes. Meanwhile, the bottom 50 percent earned 12 percent of the nation’s income but only paid 3 percent of the nation’s income tax. So, I am not sure what the President and his coterie are talking about when they claim the rich need to be taxed more in order for them to pay their “fair share”?
I know one thing and that is that the disastrous policies of the U.S. government are responsible for not only the loss of our industrial base but the current trend of America’s young enterprisers leaving for greener pastures overseas. High taxation, overregulation, inflation, and the prospects of even higher healthcare costs through Obamacare are the reason for the exodus.
With all of these productive entities fleeing our borders and given that the federal government is close to $16 trillion in debt and unfunded future liabilities, specifically for Social Security and Medicare, adds tens of trillions more to that total, how is America ever going to meet her future obligations?
To make matters even worse, should interest rates rise to their historic long-term average the annual interest payment on the national debt would more than double. Using current numbers, the total would eat up 41 percent of revenues collected. The massive increase in that line-item would require even larger annual budget deficits at a time when America can least afford it.
The problem is that Americans want their Social Security, Medicare and all the other goodies politicians promise them. And they don’t seem to mind the endless wars and corporate favoritism coming out of Washington either. This can be concluded because they continue to re-elect the same policymakers that have produced the mess we are in.
On the eve of another recession, leading policymakers in Washington are not discussing what needs to be done to turn the economy around. Very few are talking seriously about addressing the debt crisis. Lastly, most Americans who will vote this November are poised to send these same politicians back to Washington.
And that is why the end is nigh. The end of what you ask? The end of everything we have come to expect as Americans since the 1970s. It will be the end of militarism and endless wars. This time it will truly be the end of welfare as we know it. It will be the end of political favors to every special interest group under the sun. Finally, it will be the end of living off accrued wealth by producing less and less while at the same time spending like drunken sailors to acquire cheap Chinese goods.
All these things will end because we simply can no longer afford them. The real question is can we afford what will come after the end?
(Kenn Jacobine teaches internationally and maintains a summer residence in Western North Carolina.)