Actual Keynesian Theory

1] Save and pay off past debt during boom times.
2] Borrow and spend during bust times.


What our national policy has been for decades:

1] Borrow and spend during boom times.
2] Borrow and spend more during bust times.


What we have done, and are doing, has nothing at all to do with Keynes. What we have done, and are doing, is profligate spending of OPM. Period.


Endlessly borrowing from the future is a de-investment in future economies. After decades of this carcass-carving policy, those endlessly de-invested in future economies are here, gasping at our feet. With more than a little irony, and certainly not harmlessly so, our government has delivered this nation from a period of generational worker surplus, with an extra 30 million working Boomers just today leaving the peak of their earnings and tax-paying years, with nothing but a broke-busted credit card to show for its management of 'the economy.'

SS 'solvent to 2037? Ha! That 2037 date is totally without meaning, and shouldn't re-assure anyone except a fool. The Boomer generation was surcharge taxed once, for its entire working life, to create those 'assets' in the SS Trust fund-- the ones that are supposedly not going to be consumed until 2037. But they are self-issued bonds-- IOUs from the government to itself! To redeem those 'assets' representing the once surcharge taxation of the Boomers, the Boomers kids would need to be taxed a second time, for the same 'asset.' The 2037 date is merely the hypothetical future date when the Boomer's kids will have finished being taxed a second time for the same government 'asset.' And as they date moves up, that only means that the Boomer kid's will need to be taxed at a higher rate to pay them off sooner!

Too few, but many, saw this clearly, even in the 70's. Moynihan, on the floor of the Senate in the 70's: "God help us when they realize what we've done to them." I voted for Clark over Reagan in 1980, precisely over this issue.

We are decades past being able to 'fix' SS. All that is left is the slow realization of exactly what the government did with fully 15% of the middle class's lifetime earnings, to pay the benefits of a generation whose middle class paid 6% of their earnings, who were taxed to pay the benefits of a generation who paid 2% of their earnings, who were taxed to pay the benfits of a gneration that paid 0% of their earnings...

As the sinking lifeboat slowly realizes this and panics, the 'solution' offered is ... acceleration of the burn the future policies that got us to this point.

Credit must be balanced by savings/investment, or else there is endemic deflation/value corruption in the economies. The sum of all private and public credit must be balanced by the sum of all private savings/investment, because there is no such thing as public savings/investment; profligate government at every level spends every dime it taxes, and then some at the federal level, with one minor exception: local school district capital accounts. That is it.

Who saves and invests? Those with excess current income. Who saves and invests the most? The rich.


What we are saying when our panicked lifeboat mentality clamors for yet more 'tax the rich and spend it NOW!' solutions is that we want them to save and invest less and let the rest of us spend it all immediately NOW! On top of our massive public future borrowing/debt, we want to accelerate the de-investment in future economies even more.

Said another way, screw our children, we want our free government cheese and band-aids.

We need to look at SS as what it was: a one time generational thank-you to the sacrifices made by the Greatest Generation, all of whose generational pain was front end loaded, and which created every economic opportunity which followed. But now it is time for our generation to accept its share of the generational pain; ours will be back end loaded, as one way or the other, those politically promised SS benefits are going to far less than as promised by vote buying politicians long dead. Our generation pain will be back end loaded, but accepting less than politically promised SS benefits is not nearly the same thing as leaving a leg or worse in Normandy or Iwo Jima, so buck up and accept our share of the generational pain.

We should not screw over our kids or our neighbors kids just to maintain the empty political promises of vote buying politicians long dead.