Most know the Einstein quip defining insanity as “doing the same thing over and over again and expecting different results.” Fewer know that by this popular and valid definition President Obama’s economic policies are insane. With its faulty, flawed, and unjust beliefs, these economic policies displays all of yesterday’s failures. But, we see in Obama’s faith in his plan today’s lunacy and tomorrow’s collapse.
Rather than focusing on a few key issues, Obama carpet-bombed issues, points, and ideas throughout his speech at Knox College. Some of these issues included the costs of higher education, healthcare, minimum wage, and others. The constants throughout Obama’s speech were an almost Marxian obsession with the middle class and promises of statist strategies as a means to a better economy. In a more precise and coherent manner, we shall take the opposite approach in examining the President’s economic plan. Rather than detailing what’s wrong point-by-point, we shall instead examine the broader economic philosophy. This enables an individual to acquire much more than mere responses to a politician’s speech.
Early on his speech, Obama boasted “over the past forty months our businesses have created 7.2 million new jobs, this year we’re off to our strongest private-sector job growth since 1999.” This point bears twofold importance to the economics at hand. First, it shows the fundamentally flawed economic philosophy to which Obama subscribes. Second, the point shows an equally flawed attitude towards economics. The economist John Maynard Keynes created one of the most influential and destructive economic philosophies unleashed upon our world.
Though a somewhat complicated thought system, Keynesianism takes as its starting place mathematics and science. Keynes placed as his focus spending within the economy, rather than Adam Smith’s division of labor or the Austrian School of economic thought’s concept of human action. Consequently, employment became a great concern to Keynesian thought. But Keynes saw another entity that could pour money into the economy: government. By virtue of academics and institutions adopting Keynesian thought, we see the philosophy throughout our national media and conversations. Economists and commentators argue that our economic policies should encourage investment, build infrastructure, and lower unemployment rates.
But we encounter a rather troubling problem when viewing the applications of Keynesian thought. Take the economic problems of the Millennium as an example. We witnessed a major automobile company, the housing markets, and banks fail. The government and Federal Reserve entered the burning buildings, attempting to snuff out the flames with blankets of worthless money. Where, then, is the prosperity?
In response, Keynesians’ favor one example over the others—one that has penetrated public consciousness. While the government’s intrusions into the economy over the past few years represent a looming and meddling leviathan, another instance dwarfs these interventions.
Most think of World War II as a terrible event in human history. They think of young men slamming their bodies against foreign beaches, trying to survive one of life’s ultimate horrors. They too think of the millions of Jews, Slavs, intellectuals, and others systematically murdered. Perhaps they even think of a stifled Asia and ruined Europe. In short, most don’t instantly connect economic salvation part of the Second World War. But Keynesians view the Second World War as an example of how government may bring a nation out of bad economic conditions. Similarly, Keynesians view such measures as possible means for bringing back prosperity to the United States.
But how does the world’s most brutal war relate to reviving an economy? Keynesians argue that World War II’s production and employment in the United States brought about the 1950s’ “wonderful” economy. Perhaps Keynesianism’s interpreting of World War II appears sensible, but logic and reason show its fallacy. (Inevitably refuting present cries for similar measures.)
Where Keynesians see full employment and a booming economy, the Austrian School‘s adherents see young men forced into service against their will and government bullying and regulating markets into producing for its war effort. In this vein, Art Caden analyzes the popular myth of World War II’s economics. Caden, an Austrian, argues that the relaxing of New Deal policies after the war made the economic progress possible. Despite what easily manipulated numbers and “statistics” announce, one cannot deny the facts.
Another dangerous idea President Obama promotes in his plan relates to equality. Obama notes “This growing inequality, not just of result [with the recession aggravating it] … inequality of opportunity … it’s not just morally wrong, it’s bad economics.” And his reasoning? Because fewer people have less money to spend. As this philosophy clouds, essentially, Obama’s entire plan, we must address its flaws.
As previously noted, Keynesianism views spending as the economy’s heart and engine. It justifies such conclusions via mathematics and statistical reasoning. Although, as people too often forget, mathematics and science possess limitations, handicapping their usefulness. Many take them from their realms and apply them in alien environments. Sometimes, the results are merely flawed, though others are perverse. Austrian School economists argue that human action serves as the market’s foundation. Only this human action, incomprehensible by science, gives sufficient economic answers, even if leaving us in a state of some unknowns.
The insanity of Obama’s Keynesian economic plan is much larger than the United States. Even though World War II did not produce a Wirtschaftswunder and the Federal Reserve’s policies created the housing market crash, the evidence continues showing Keynesianism’s utter failures. In Japan during the late-1980s and 1990s, Keynesian solutions to a recession did nothing to truly aid the economy. And the European Union’s recent crisis resulted from Keynesian monetary policies. If Keynesian policies failed in all these instances, it is insanity to believe they will yield different results.
The economically perceptive see Obama’s plan as a future failure, and the politically perceptive see it as pandering to voters and citizens. In reality, the administration may not care if the plan succeeds or not. Rather, it is the opening of the government coffers and enticing citizens with educations, healthcare, and retirement. Completely free markets, even if left alone, will move up and down. It is merely natural. But politicians may not remain in power. And, while politicians implement insanity, their base desire for remaining in office persists. We find, then, an even greater insanity, one beyond Keynesian thought: looking to politicians and government for answers, guidance, and change.