The Second Death of John Maynard Keynes

From Nation columnist Eric Alterman:

http://www.thenation.com/article/163065/second-death-john-maynard-keynes

"Data-wise, the proof has been in the pudding. While austerity is all the rage among politicians on both sides of the Atlantic, the International Monetary Fund has found that deficit cuts of 
1 percent of gross domestic product tend to raise unemployment by 0.3 percentage points. Markets have also tended to react accordingly. The Dow fell by fully 265 points, or 2.2 percent, on the day Obama signed the Boehner deal and twice that amount again—512 points; 4.3 percent—just two days later. Since the showdown began earlier this year, according to economist Simon Johnson, the stock market has lost about 20 percent of its value (roughly $10 trillion). Thus, the consequence of Tea Party anti-Keynesianism has been, in Johnson’s words, “to reduce publicly funded social benefits—including pensions and Medicare—even as its methods dramatically reduce the value of private wealth now and in the future.”

None of this matters to almost anyone associated with the Republican Party these days. As David Brooks reports in the New York Times, “It used to be that there were many themes in the Republican hymnal. Now there is only one: Government is too big, and it needs to be brought under control.” Its biggest beneficiary is Texas Governor Rick Perry, the new Republican frontrunner, who, Brooks notes, “does very well with the alternative-reality right—those who don’t believe in global warming, evolution or that Obama was born in the U.S.”

Perry sticks to the script as if it were Scripture. “The fact is, government doesn’t create jobs,” he said. “Government can only create the environment that allows the private sector to create jobs.” Thing is, reality has Keynesian bias even in Perry’s Texas. During Perry’s decade-plus tenure as governor, public sector jobs have increased at twice the pace of those in the private sector. For the past three years, jobs in Texas’ private sector have actually fallen by 0.6 percent, while in the public sector they have increased by 6.4 percent. The further anti-Keynesian demand is that budget-balancing be done exclusively with spending cuts. All the Republican presidential candidates rejected a hypothetical deal in which ten dollars of service cuts would be matched by a single dollar of new revenues. Perry, like most of them, signed Grover Norquist’s anti-tax pledge (to “oppose and veto any and all efforts to increase taxes”), and his campaign website promises to “take his proven budget-cutting record to Washington.”"