A strong Keynesian argument that speaks to the American people

From the 2012 US elections thread:

To all those longing for a Keynesian message that rivals the conservative populist message, this is the thread to build one. Remember: communication is more important than the truth; because communication commands the attention needed for the truth to bear fruit.

As a starting point, here is how easy it is to explain Keynesian Economics in plain English. Let that muse carry your message, and convey your spirit and certainty!

There was already a thread on Keynesian economics but the concenus was that because Europe tried it. Yanks are automatically against the idea.

Dutch Lesbian

Read it and I am not buying it.

Keynesian does not equate to Socialism. Those that would rather pick themselves up under an Austrian system are empowered to do the same under Keynesian. The government is merely giving the tools with which to build. Ultimately, the American citizen just wants to know how their bottom line is affected; that's why claims to lower taxes are attractive. Right now Americans want to go back to work, and that's what will be done.

That Simple Wikipedia article is baby talk. It's like reading a book for six year olds. Let me see if I can come up with something better.

edited 30th Sep '11 7:50:26 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

When did I say socialism,I just said thought even when you showed me the article that it was a terrible idea.

edited 30th Sep '11 7:50:29 AM by joyflower

Why is it a terrible idea? It worked in Europe for a while

Dutch Lesbian

It also built the West coast. This is what Keynesian needs to get away from; the notion of centralized planning. Provide the stability needed to venture forth without dictating every action, and the results will speak for themselves.

Lowering taxes temporarily during economic downturns is just as Keynsian as raising spending temporarily during economic downturns. The idea that the first is somehow a populist invention outside Keynsian economic theory is silliness.

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Not its not, lowering taxes in a downturn just hurts economic activity

Dutch Lesbian

But the related notion of Austerity is populous, and hurts economic growth on two fronts; the equivalent of draining blood from a body with a weakened heart.

It's a question of returns. Lowering taxes saps funds from the government at the same time as it gives money back to consumers — in other words, you're giving and taking away at the same time. Lowering taxes on the wealthy has negative returns because they don't spend the extra money.

Economies are driven by people buying stuff. The government is a consumer as well as a producer. When the government spends money, it's functionally equivalent to any other expenditure of money. People frequently fail to understand this.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

Here's my crack at Keynesian theory in layman's terms.

What is an economy? An economy is people buying stuff (demand) and people selling stuff (supply). To make an economy work, you need both of those things in roughly equal amounts.

If there is too much demand and not enough supply, prices rise because stuff is harder to get. Businesses invest money in buildings, factories, and workers to meet the demand. If businesses can't get money for these things, then you have a supply-side crisis which can be resolved by making loans easier to get, lowering taxes, and encouraging investment.

If there is too much supply and not enough demand, then businesses fire workers because they don't have enough sales to justify their payroll. Production facilities go idle and are eventually closed. It doesn't matter how much money is available to invest because there's nothing to invest it in. As people lose their jobs, they can't buy stuff, which reduces demand, which in turn reduces jobs. To escape from a demand-side crisis, you need to put money directly into the hands of consumers so they can spend it on things they need, which in turn causes businesses to hire more workers, which puts more money into the economy, and so forth.

The Keynesian argument is that, when consumer demand is insufficient, it is the government's role to step in and stimulate it by borrowing money from investors and spending that money in ways that boost consumption. The deficits that are created in this manner are then paid back when the economy is back on its feet.

I despair of explaining what's wrong with deflation or why government borrowing is not bad.

edited 30th Sep '11 8:36:38 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

A Moody's economist, Mark Zandi, testified in front of the senate as to the effects of various spending practices, comparing their effects in terms of dollars of wealth generated compared to one dollar of spending in that practice.

Here is the link.

Findings:

• Tax Cuts
  • Nonrefundable Lump-Sum Tax Rebate 1.01

  • Refundable Lump-Sum Tax Rebate 1.22

  • Temporary Tax Cuts
    • Payroll Tax Holiday 1.24

    • Job Tax Credit 1.30

    • Across-the-Board Tax Cut 1.02

    • Accelerated Depreciation 0.25

    • Loss Carryback 0.22

    • Housing Tax Credit 0.90

  • Permanent Tax Cuts
    • Extend Alternative Minimum Tax Patch 0.51

    • Make Bush Income Tax Cuts Permanent 0.32

    • Make Dividend and Capital Gains Tax Cuts Permanent 0.37

    • Cut in Corporate Tax Rate 0.32

• Spending Increases
  • Extending Unemployment Insurance Benefits 1.61

  • Temporary Federal Financing of Work-Share Programs 1.69

  • Temporary Increase in Food Stamps 1.74

  • General Aid to State Governments 1.41

  • Increased Infrastructure Spending 1.57

  • Low-Income Home Energy Assistance Program (LIHEAP) 1.13

Very big Daydream Believer. "That's not knowledge, that's a crapshoot!" -Al Murray "Welcome to QI" -Stephen Fry

And let's note that anything with a value below 1 in that chart is taking net money out of the economy.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

Now to translate that into a campaign slogan without resorting to numbers.

"For every year the Bush-era Tax Cuts continue, that's another year the nation's schools fall into disrepair. Repeal the Bush Tax Cuts, and repeal the war on our children's education."

In theory, one would expect that unemployment compensation, food stamps, WIC, etc. would have the highest Keynesian multiplier in terms of stimulative effect, since the poorest people have the highest marginal propensity to consume. (Thought experiment to explain the rationale: one guy makes 10K an year, the other 10M. Each person gets 1K in additional income. Obviously, the guy who makes 10K is now going to be able to eat more or pay bills. The guy who makes 10M is stuffing it into the mattress.)

It's nice to see an empirical number that supports the theory.

As for why aid to states rates so high, remember that the state budget pays for a lot of salaries of police, firefighters, teachers, and other middle-income salaried employees who would otherwise likely be without jobs...

Fighteer's first simplification basically works as a good thesis statement and/or essay opener. I would like to know what's up with inflation versus unemployment, and all that jazz, and we should probably get some of the Austrians in to play counterpoint...

I am now known as Flyboy.

My very rough understanding of inflation is that it tends to occur in the following circumstances:

• Demand for products exceeds their supply. Prices go up because people are willing to pay more for scarcer goods.
  • Corollary: This can occur when a commodity price (like oil) increases due to market conditions, but such things tend to sap demand, balancing the scale.
• The total supply of money in the economy increases but the total goods produced does not. With more money available, each individual unit of money is worth less.
• Hyperinflation can occur as a result of governments dumping cash into a failing system in order to prop it up, but there are also extreme supply-side deficiencies. It's sort of both of the above scenarios multiplying each other.

Deflation occurs in the following circumstances:

• Supply of products exceeds the demand for them. Sellers lower prices in order to attract scarce customers.
• Hoarding means that there is less total money in circulation. With less money available, each individual unit of money is worth more.

It is worth noting that the current crisis has both inflationary and deflationary elements. The government is (was) pumping money into the economy in the form of monetary policy measures, but most of that money went to businesses who promptly hoarded it. Thus, we have to look at the supply-demand cycle instead, and we're currently very supply-heavy, which is a deflation indicator.

Krugman states that, although nominal inflation is currently positive (barely), we are actually in a deflationary cycle. I'll have to look up his blog on the matter so I can have an actual citation.

The housing market, particularly in properties under $1 million in value, has been heavily deflationary since 2006, and it's easy to see why. Demand is down because of the overall economy, because people can't get loans, and because there is a deflationary expectation, leading to hoarding — people think that prices will be lower if they continue to wait, which becomes a self-fulfilling prophecy.

edited 30th Sep '11 2:41:42 PM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

"For every year the Bush-era Tax Cuts continue, that's another year the nation's schools fall into disrepair. Repeal the Bush Tax Cuts, and repeal the war on our children's education."

I'd go for something more personal, remember, we're aiming for close to home. I don't know what the average American cares about enough to compose a speech. If this was Canada I'd say healthcare but I doubt that's the average American's concern. Still for seniors I'd add

"Every year these tax cuts continue we lose more and more money that could be spent on medicade, that could be spent helping you, the elders of our nation.

Is using "Julian Assange is a Hillary butt plug" an acceptable signature quote?

Strongest argument in American history is World War Two. Spent 550ish billion in contemporary money, kicked Nazi ass, and become fucking loaded. Vote Keynes 2012.

I am now known as Flyboy.

Thread Hop.

Regarding inflation: all I can say is You Keep Using That Word. It is much more specific than you think it is.

To explain, inflation has nothing to do with demand of anything. Inflation is specifically triggered by increases in money supply.

Expergiscēre cras, medior quam hodie. (Awaken tomorrow, better than today.)

The actual article on wiki: http://en.wikipedia.org/wiki/Keynesian_economics

Not in simple English.

Youw ant an argument? Look at the American West.

If you don't like a single Frank Ocean song, you have no soul.

it is very difficult to sell Keynesianism to American People because association that small budget deficits are a sign of self-control and personal virtue. [Depression = Suffering] because [Moral Decay] to atone we must [Austerity = Fasting].

http://thinkprogress.org/yglesias/2011/09/30/333491/moral-panic-fat-and-fiscal-policy/

While there is a positive correlation between money supply and price level, it is completely and totally false to state that the money supply is the only thing that causes changes in the price level. If anything, it's wages that ultimately determine the price level.