by Rep. Ron Paul, MD*
Keynesianism Delivers a Decade of Zero (Print Version)
Le Québécois Libre, January
15, 2010, No 274.
This past week we celebrated the end of what most people agree was a
decade best forgotten. New York Times columnist and leading
Keynesian economist Paul Krugman called it the Big Zero in a recent
column. He wrote that “there was a whole lot of nothing going on in
measures of economic progress or success” which is true. However,
Krugman continues to misleadingly blame the free market and supposed
lack of regulation for the economic chaos.
It was encouraging that he admitted that blowing economic bubbles is a
mistake, especially considering he himself advocated creating a housing
bubble as a way to alleviate the hangover from the dotcom bust. But we
can no longer afford to give prominent economists like Krugman a pass
when they completely ignore the burden of taxation, monetary policy, and
Afterall, Krugman is still scratching his head as to why “no” economists
saw the housing bust coming.
How in the world did they miss it?
Actually many economists saw it coming a mile away, understood it
perfectly, and explained it many times. Policy makers would have been
wise to heed the warnings of the Austrian economists, and must start
listening to their teachings if they want solid progress in the future.
If not, the necessary correction is going to take a very long time.
The Austrian free-market economists use common sense principles.
• You cannot spend your way out of a recession.
• You cannot regulate the
economy into oblivion and expect it to function.
• You cannot tax people
and businesses to the point of near slavery and
expect them to keep producing.
• You cannot create an
abundance of money out of thin air without making
all that paper worthless.
• The government cannot
make up for rising unemployment by just hiring all
the out of work people to be bureaucrats or send
unemployment checks forever.
• You cannot live beyond
your means indefinitely.
• The economy must
actually produce something others are willing to buy.
• Government growth is
the opposite of all these things.
Bureaucrats are loathe to face these unpleasant, but
obvious realities. It is much more appealing to wave their magic wand of
regulation and public spending and divert blame elsewhere. It is time to
be honest about our problems.
The tragic reality is that this fatally flawed, but widely accepted,
economic school of thought called Keynesianism has made our country more
socialist than capitalist. While the private sector in the last ten
years has experienced a roller coaster of booms and busts and ended up,
nominally, about where we started in 2000, government has been steadily
growing, because Keynesians told politicians they could get away with a
tax, spend and inflate policy. They even encouraged it! But we cannot
survive much longer if government is our only growth industry.
As for a lack of regulation, the last decade saw the enactment of the
Sarbanes-Oxley Act, the largest piece of financial regulatory
legislation in years. This act failed to prevent abuses like those
perpetrated by Bernie Madoff, and it is widely acknowledged that the new
regulations contributed heavily not only to the lack of real growth, but
also to many businesses going overseas.
Americans have been working hard, and Krugman rightly points out that
they are getting nowhere. Government is expanding steadily and keeping
us at less than zero growth when inflation is factored in.
Krugman seems pretty disappointed with zero, but if we continue to
listen to Keynesians in the next decade instead of those who tell us the
truth, zero will start to look pretty good.
The end result of destroying the currency is the wiping out of the
middle class. Preventing that from happening should be our top economic
is a member of
the U.S. Congress (R) representing the 14th District of Texas.
Texas Straight Talk was first published on January 4, 2010.