Putting in context this latest attempt to deny that the US will suffer the progressive-Keynesian disaster now befalling Greece, 2010 was supposed to be the year of Keynesian triumph, where Obama's government did as Dr. Krugman urged to make the economy march towards prosperity. All that was needed was to take economic resources from the discipline of markets and give them to politicians.
Keynesian ideology is simple. It must be, as it considers only short-term events in a closed economy having an economically ignorant population. If consumers won't spend, politicians take their money and spend it for them. If businesses won't invest, politicians take their money and invest it for them.
And as an additional benefit, we get "social justice", Dr. Krugman told us four months ago in his editorial "Learning from Europe".
http://www.nytimes.com...
Sure, we lose some growth, innovation, and jobs. But everyone will have "free health care" and a house via Fannie or Freddie. We will set aside bankruptcy rules to reward Obama voters, start trade wars with the same goal, and ensure that Obama's Wall Street cronies do not lose a dime betting on socialism.
Any rational individual knows that this is unsustainable. With "settled economics" reinforcing their intrinsic quest for power, Keynes leaves politicians with no remaining reason NOT to distribute candy. Free insurance for kids until 27 (Obamacare)! Retirement at age 53 (Greece)! Unemployment benefits for 98 months! Why not? Keynes says this is all "good for the economy."
Unlike governments, rational people consider the long term and act if they see Keynesians coming to take away their money and inflate what is left behind. Keynes retorted: "In the long run, we are all dead!" Keynesians think this retort exquisitely dispatches their critics. Indeed, Dr. Krugman posts collections of such "exquisite" retorts and insults.
http://krugman.blogs.nytimes.com...
Krugman bloggers like “Mika” are not satisfied to see Dr. Krugman only insult apostates; he also wants to silence them:
http://community.nytimes.com...
Such Stalinism might be the only way to save Keynes and “progressivism”; if the truth comes out, progressives and Keynesians will be shown to have been fools. After all, in 2008, just two years before he told us to learn "justice" from Europe, Dr. Krugman pronounced Europe "the comeback continent".
http://www.nytimes.com...
But Europe is not a "comeback continent". It is a "bailout continent". Keynes plus progressivism does not equal stability, security, or social justice.
And it is clear why. The progressive state, hobbled by the misallocation of resources intrinsic to politics, with its low growth, low innovation, and high unemployment, will collapse (in the long run). Like Fannie and Freddie. Chrysler and GM. Like Wall Street, when they bet on Greece, Fannie and Freddie.
So progressivism requires something called "bailouts". In 2009, the OECD spent trillions on bailouts and stimuli. In 2010, a trillion more.
Now, everyone needs bailouts. Even the bail-outers.
Germany, for example, will have 61% of its population over age 60 in 30 years. Germany will need the resources it is now using to bail out "socially just" Greece to itself avoid default. Will Germany then turn to the US?
And who will bail out the US, already with $200,000 in unfunded liabilities per citizen and debt at 92.6% of projected 2010 GDP, according to the IMF? After we give $50 billion more to Greece, and unknown sums to Portugal, Spain, and California. All in the hope of postponing by a year the default inherent in progressive politics and Keynesian ideology.
To avoid default, the US will try to raise taxes on everyone, including those making less than $250,000. Even 40% will not be enough, however, after tax increases give the US chronic unemployment, low productivity, and other symptoms of Eurosclerosis. Thus, the US will still default. If you are less than 50, you will never see your "safe" (= "not privatized") Social Security, Medicare, or "free health care". The government will not deliver it because the government will not be able to.
Like Greece.