The massive deficit spending that Trump has initiate will transfer more wealth and income from the bottom of the food chain to the top. That is what Keynesian style stimulus is used for. The ostensible purpose is to stimulate the economy. What it does in practice is generate feeding frenzies on government money, for those who lobby for the stimulus. The beneficiaries are the businesses and individuals who are paid directly with government money. All others lose. Donald Trump’s deficit spending will further widen the wealth and income between the upper 1% and the rest of the country.
In the minds of some economists, there is a role for Keynesian stimulus. That is where the benefit remains, in their minds. In the history of the world, there has never been a case where Keynesian theories, when put in practice, have stimulated an economy. How often have these theories been tried? They have been tried constantly and are being tried today.
Just yesterday, I got correspondence from a reader telling me that I should look at the whole picture with respect to Trump’s deficit spending. She went on to explain that the tax cuts and the deficits would generate enough tax revenue to take care to the extra spending. What I explained was that her argument was actually based on far less than the whole picture.
There is no way for Keynesian deficit spending in to work because the necessary ingredients for it to work are missing. Most important is Keynes’s concept of a Straw Man. The Straw Man is meant to be a completely unbiased person who has no political interests or any personal agenda. The job of the Straw Man is to implement the program when needed in the right proportions. There are no Straw Men in the universe.
If there was a such thing as a Straw Man, he would be making economic decisions. Governments only make political decisions. No complex math is need to completely debunk the Whole Keynesian concept. With the most important ingredient missing there is no way the theory could work.
So what is Keynes General Theory good for? Presidents use it to justify fiscal spending. Constituents are told of the benefits and assume everything will go as planned. The corporations which benefit are not impoverishing the overall population purposefully. That is strictly a byproduct of the process. Economic stimulus provides a way for politically powerful to bypass the free market process of competing. With political power it is possible to exempt oneself from the rigors of free market discipline which the rest of the country is subject to.
All presidents use the idea of stimulus to get constituents to agree with more government spending. The process never changes. First the population gets a tax cut. That desensitizes them to the round of spending that is to follow. The spending occurs and the gap between rich and poor widens further. This will be the result of the Trump spending program.
You will notice that there is almost zero push back by Democratic leadership on Trump’s spending and trade war. When it is time to fleece the public all in Washington move over to the same side.
The truth is a hard sell. Fantasy Free Economics gains readers one at a time. Major search engines simply do not list blogs which disagree with their political agenda. As long as folks share the link to this blog and others speaking out against the grain, the truth will at least trickle into the public consciousness.
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