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Letters to the Editor

November 21, 2009

The country needs to avoid Keynes' economic theories



To the editor:

In his recent editorial, "There is a reason economist Keynes is a survivor," Allan Powell heaps on accolades for a dead economist who should in fact be blamed for the financial mess we are facing today. Unfettered spending, easy credit and regressive tax policies are all hallmarks of Keynesian theory in action and are precisely the reason that America continues to wallow in recession, half a step removed from financial collapse.

At the heart of Keynes' theory lies the economic problem of a society that under consumes and saves too much (doesn't sound much like the America I know). These "unused savings" no longer circulate through our economy, so the dollars are literally no longer at work. As production slows and unemployment rises, people tend to spend less and save more, uncertain of what their future holds. This self-fulfilling downward spiral leads to recession, depression or worse. Keynes' solution then is for the government to ride to the rescue with massive spending that will create new demand, new jobs and increase consumer confidence, or so the theory goes.

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Powell would have the casual reader believe that the government resurrects Keynes' general theory rarely, akin to breaking the glass in case of a real financial emergency. The notion that Washington only calls on Keynes occasionally to avert a financial collapse made me laugh out loud. Keynes' theory has continued to be the dominant economic model for the United States since the Roosevelt administration. When Nixon set the dollar afloat by closing the gold exchange window in 1971, he exclaimed "we are all Keynesians now," reflecting that our country was fully invested in this economic scheme for good or ill.

Today, our federal government fights trillion-dollar wars on borrowed funds, bails out auto companies that later go broke and props up banks that pay out million-dollar bonuses. It refuses, however, to lend credit to small business and injects new "stimulus" by allocating $787 billion in unaccounted funds to fictional congressional districts. As a nation, we should be asking "if we're broke yet?" Not in the world according to Keynes. Even though Medicare and Social Security are known to be unfunded mandates over the next 10 years, there is no meaningful discussion of how to properly fund these systems.

Keynesianism has no solution for our current problems and is just dead wrong. Much like an alcoholic who has been on a binge and wakes up feeling terrible, our country desperately needs to put its financial house in order. Keynes' answer to the hangover is to have a few more drinks when in fact the poison needs to be purged from the system. Over the past 100 years, the dollar has lost 96 percent of its purchasing power through the inflationary monetary policies of Keynes paired with the unstoppable printing press of the Federal Reserve. This has resulted in a $12,008,000,000,000 debt owed to foreign countries. We'd be much further ahead by burying Keynes once and for all, but the politicians by themselves will never kill the golden goose.

There are solutions. A sound monetary approach would demand that risky ventures, bad businesses and banks with overextended balance sheets to fail, wiping their bad investments from the books. Short-term pain would get us on the road to real recovery. Instead, the current policies of more spending will prolong the recession and unemployment, kicking the can down the road temporarily. The Ludwig von Mises Institute at www.mises.org clearly explains why government intervention and inflationary spending create moral hazard, mal-investment and unsustainable bubbles, but also offers free market solutions based on human action, the bedrock of economics.

In 1936, John Maynard Keynes closed his General Theory of Employment, Interest and Money with the following statement: "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." How utterly prophetic.

Allen Twigg
Hagerstown




Health care reform should be for the benefit of the citizens



To the editor:

I just read the article, "Bartlett offers ideas on health care, energy." Am I supposed to feel confident in U.S. Rep. Roscoe Bartlett's vote? He claims that he did not read the bill "nor did anyone else."

"The bill was written in legalese." Really? All bills are written that way, I would challenge any citizen who is not a lawyer to read any bill and let them define its terms to the rest of us. This is why we elected you and every other Congress member and senator. How could any responsible member vote ... on a bill they did not read? You claim the bill is just another example of bigger government. How do you know, you didn't read the bill?

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