Monday, November 1, 2010

Reich Promotes the Scary New "Keynes Taxism"

Robert Reich is actually a pretty decent political observer. It's as an economist that he has no clue. Unfortunately, most of his books and appearances center around his economic views.

During this appearance on the Colbert Report, he discusses the 'Great Recession' but fails to bring up the role played by money supply in causing the business cycle. Instead, what he does is promote the new twisted Keynesianism, i.e. Keynes Taxism.

In orthodox Keynesianism, a decline in aggregate demand is viewed, incorrectly as the cause of business downturns. The faulty prescription is more government spending, specifically deficit spending.

In the new Keynesianism that is promoted by Reich, the decline in aggregate demand is still incorrectly viewed as the cause of the downturn. But instead of calling for greater deficit spending, the Keynes Taxism calls for taxing the rich, which is then spent by the government.

Reich argues that the rich tend to save more than spend and thus do not contribute to aggregate demand. Thus, Reich argues that they should be taxed and the funds spent.

This turns how the economy works completely on its head, but has powerful sponsorship as a theory by those in or near government, who want to get their hands on more money.

In reality, it is not aggregate demand but businessmen saving and investing, who are the benefactors of the economy. The rich, who have more money to invest, thus are doing exactly what needs to be done to get an economy going. They save and invest more, which means more goods will be produced. It is the production of goods which ultimately results in an increasing standard of living, not "aggregate demand" which simply absorbs the good already produced.

Below is Reich getting everything backwards.

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1 comment:

  1. This guy is dumber then a bag of rocks. Even Keynes would not agree with him on this. So what he is essentially saying, is that we just get rid of the I and replace it with G? Um, that sounds like the road to socialism.