The Keynesians and the Capitalists are heading for an economic showdown at the O.K. Corral.
Keynesians believe the central government should control the economic levers affecting the masses. The economy can’t be entirely left up to the free market. Big government believers want the “leaders” determining the winners and losers. Controlling reallocation of wealth preserves the power of the political class. Using tax dollars to garner votes has turned into an art form.
George Bernard Shaw said, “A government that robs Peter to pay Paul can always depend on the support of Paul.”
US Governmentspending.com “guesstimates” 2017 spending on welfare and Medicaid will top $1.127 trillion. While the welfare class grows, Peter is working his butt off and sees a lot of his hard earned money wasted.
Many felt the elections in Britain (Brexit) and the US were similar, a major pushback against a powerful, controlling central governments. Margaret Thatcher reminds us, “The problem with socialism is that you eventually run out of other people’s money.”
A new sheriff in town
Political cartoonists depicted President Trump as the new sheriff. “Establishment” politicians (from both parties), government workers, and liberal media are not going to give up their power without a fight. The media onslaught leading up to the election will be tame as compared to what lies ahead.
The political ambush
I spent time with the late Jack Kemp, a firm believer in capitalism and “supply side economics.” The premise is simple; the government cuts personal and corporate taxes and also spending. It takes a couple of years to see the effects; but the economy picks up and government tax revenue increases due to the booming economy.
When President Reagan cut taxes, Mr. Kemp was adamant that the socialists feared it would work. They screamed, “Tax Cuts for the Rich” and pointed to increasing budget deficits. The democrat-controlled congress would not curtail domestic spending; they could not let the Reagan plan work.
Kimberly Amadeo’s analysis shows inconclusive results:
“The economy recovered out of, what was then, the worst recession since the Great Depression.
However, Reagan also increased federal spending on defense at the same time. He doubled the national debt while he was in office. According to Keynesians, this would have also boosted economic growth by putting more money into the economy, creating jobs and increasing demand.”
The Federal Reserve is a powerful player. The Fed has a symbiotic relationship with government. The Fed finances deficit spending while the government protects them. In 2016 senate democrats blocked legislation to audit the fed.
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