Armey on Keynes vs Heyek

Ripped off from the Wall Street Journal is this timely note from Dick Armey.

Classical economists up to that time had emphasized a balanced budget and government restraint as the primary goals of fiscal policy. The simplistic notion that "aggregate demand" drove investment and employment threw all of that out the window, but it had one particular convenience for policy makers. Government spending is, according to Keynes's construct, a key component in determining aggregate demand, so more spending, even to resod the Capitol Mall or distribute free contraception, drives the economy in the short run.

A father of public choice economics, Nobel laureate James Buchanan, argues that the great flaw in Keynesianism is that it ignores the obvious, self-interested incentives of government actors implementing fiscal policy and creates intellectual cover for what would otherwise be viewed as self-serving and irresponsible behavior by politicians. It is also very difficult to turn off the spigot in better economic times, and Keynes blithely ignored the long-term effects of financing an expanded deficit.

It's clear why Keynes's popularity endures in Congress. Intellectual cover for a spending spree will always be appreciated there. But it's harder to see any justification for the perverse form of fiscal child abuse that heaps massive debts on future generations.

This is a brilliant piece of writing which takes us directly into the heart of the matter facing us. I Hayekian, and it seems that when I've just about worn myself out on the crisis facing me as a geopolitical neocon, here comes another to pull me back in. Keynes vs Hayek, with the troglodytes of Congress weighing in on the Keynesian side.

Every you hear a Republican say 'mortgage our children's future' this is what they're talking about. The huge bill that will come due from all of this deficit spending. I think there may come a time in my life when, with regard to taxation, it will be cheaper for me to live in Canada.

I know Obama cannot control this Congress and this is his first test. He is either in the tank with them, fulfilling dreams of profligate programs, or he is powerless to constrain their appetite for uneconomic foolishness. I almost wish that he was a socialist at this point. At least he'd have the stones to actually take over the insolvent banks.