Sublime and Beautiful

The Need to Call a Keynesian a Keynesian

Posted in Uncategorized by chaoren on March 27, 2009

Despite all of its efforts to maintain a high level of communication with the American public, the Obama Administration has failed to convey the core principles behind its economic stimulus plan. This failure has left the Administration vulnerable to critics who decry it as incompetent, while at the same time refusing to offer any plausible alternatives of their own. The truth of the matter is that the Administration’s plan is based on a logic that holds support among top economists such as Nobel Laureates George Akerlof, Joseph Stiglitz, Robert Solow, and Paul Krugman.  But, while President Obama’s recent public addresses might have helped his popularity ratings, they have done little to persuade Americans of the sound reasoning behind the stimulus plan. Thus, surprisingly, communication has been Obama’s greatest weakness in terms of dealing with the financial crisis so far.

In an admirable attempt to return political debate in America to an intelligent level it seems the Obama Administration has neglected the importance of the old K.I.S.S. (Keep It Simple Stupid) stratagem. The President and his staff have conducted an intensive PR campaign to build support for the stimulus plan but the focus has been far too diffuse. One day officials are educating the public about the intricacies of moral hazard and systemic risk and the next day they are railing against AIG bonuses. Why spend so much time speaking to such peripheral issues when the fundamentals of the stimulus plan are not widely understood?

It would be much better if Obama and his crew would simply pause, acknowledge that there is an elephant in the living room, and explain what it is doing there, meaning: someone in the Administration should finally recognize and make the case for the Keynesian principles that so obviously underlie the stimulus plan. Ideally Obama himself would undertake this task in one of his Presidential Addresses. The matter could be dealt with by leveling with the American people and making a few basic points.

Firstly, the President should explain that the stimulus plan is aimed at combating a multiplicity of economic problems which require different kinds of approaches but that the plan, as a whole, is based on the premise that government is part of the solution. It is imperative that the President make this first point. He must proudly affirm that government serves a purpose. He must make this point so as to draw a line in the sand for the sniping politicians and pundits who, to this day, still harangue the public about the evils of government intervention and the infallibility of anarcho-capitalism. Only after the Administration proudly takes a stand will it be able to deal with critics from a position of strength because, until it does so, the presumed flexibility the Administration gains by not affirming a greater underlying philosophy will be perceived as chronic indecisiveness or, worse yet, incompetence. Democrats may have disliked George W. Bush’s obstinate demeanor. However, as the 2004 Presidential Election proved, Americans want a President who lets them know where he stands.

Secondly, the President ought to explain how the government is vital to creating jobs and keeping people employed as private sector jobs fall by the wayside. Government played an enormous role in getting people back to work after the onset of the Great Depression, government succeed in the same respect in Japan during the country’s “Lost Decade” and it could do the same during these troubled times.

Finally, something needs to be said about the importance of government spending in maintaining liquidity in the economy. Critics of government spending gripe about the massive deficit that we are wracking up (oddly enough, many of these same critics stayed silent our previous president added more than $4 trillion to our national debt) but the need to keep cash flowing is indisputable and when banks are loathe to lend and private businesses are cutting back on their spending who is left but the government to keep money moving?

Addressing the aforementioned issues will not free Obama and his staff from criticism. On the contrary, most critics of the stimulus plan would probably react vehemently to such a bold stance. The benefit of taking such clear, decisive action would be that it would help the President align those who are not reflexively opposed to government involvement in the economy behind his economic stimulus plan. The days when government involvement in the economy was taboo are over. It is time now for the President of the United States to communicate that to the American people.

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One Response

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  1. Pixi said, on September 1, 2009 at 9:36 am

    Hi,

    I am a human rights advocate in my country but I contact you regarding a different matter, the rights of animals and cruel practises in China. I ask that you visit the follwoing web site and spread the message about what is happening in your country:

    http://www.peta.org/feat/ChineseFurFarms/index.asp

    These cruel practises are barbaric and must stop.

    I sincerely hope that you will look at what is happening and play your small role and bring shame to those people who perpetrate such obscene cruelity onto animals.

    Regards, Pixi


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