A little John Maynard Keynes never hurt anybody...

In light of President Elect Obama's call for action on the nation's failing economy, I thought I'd posit some regurgitated wisdom from that famed economist of the last century, good old First Baron John Maynard Keynes. First, the criticisms of Obama's stimulus plan from members of his own party are sound and should be considered earnestly by the new President's economic advisers. A tax cut, in the form of a $1000 credit to "most middleclass families" may not have much of an effect on consumer confidence if it has any effect at all.

I don't know what you all did with that $600 (per child) from last years income tax returns, but at my house we used it to pay off debt from Christmas...not exactly the intended outcome. Obama, keen to bridge divisions between old school supply siders who populate the Republican ranks ad nauseum, is barking up the wrong economic tree. What the country needs now, besides love sweet love, (which it always needs) is an ambitious program of infrastructure investment that will serve two purposes: 1.) it will put people back to work immediately. People with jobs spend money, and there are multipliers that reverberate through the greater economy. #2) it should (if well conceived and executed) provide economic development in the form of capital projects which should continue long after ribbons are cut for the bridges and highways and powerlines. Tax cuts at this point are moot, since incomes are alredy likely down for most of us, $1000 per family isn't likely to bridge that particular gap (pun intended).

I'm not keen on Keynes. He was IMHO a socialist, who advocated government intervention in the economy far more than a Chicago schooler like myself could ever accept (not to mention at least 40% of US voters at any given time.) But bold initiatives in the form of quasi-socialist workl programs have saved my beloved capitalism from itself in the past. Ladies and gentlemen, I give you, the New New Deal lite...

My father, a lifelong conservative Republican evangelical, recently remarked to me that free markets only work when there is an underlying morality guiding them. I disagree. The only thing that guides free markets is millions of consumers making millions of decisions with their own interests in mind. If we can assume that all the actors on the stage are acting in good faith (as I believe most are) then there is no reason to over-regulate. Do people game the system? Yes. I believe people, like dogs (my dog anyway) will try to get away with as much as they possibly can, and give away as little as they possibly can. However, it is usually knee jerk reaction to a market failure that leads to stricter regulations, just at a time when the wheels of commerce should be greased. Do we need a more intrusive government? No. When markets fail, as they recently have, do we need a more active government? I believe we do.

I won't stand for some serious rethinking of American government, the system actually works and it works pretty damn well. Anyway, the two party system virtually ensures that the politcal winds will blow the other way (with a vengeance!) if the party in power over reaches its mandate. For that reason, unless we're dusting off the old Soviet model, we as a nation must peg center if we're going for lasting change. The initial thrust of the stimulus must put people back to work, and leave us with a product that is mostly devoid of pork. Major infrastructure like freeways, bridges and power grids will do the trick. The return of the WPA? I think not.

Then again, I may be wrong. Maybe this is unprecedented. Maybe this is the end of the Empire. Maybe this is the beginning of the end times. mmmm...I don't think so.