Keynesian Economics, The Fed, and the Debt Ceiling: Wait…What?

By Paul Bousquet:

Let us travel back to 1st grade for a moment, that magical time where girls had cooties and everything was simple. It is time for math. There is a problem on the board that reads, “You have $5. You gave $4 away to Suzie. How much money do you have now?” Using that new thing the teacher talked about yesterday called subtraction; you solve the problem and determine that the correct answer is 1 dollar. The teacher calls on you to answer, which you do. Immediately following that, a classmate, Barrack, stands up and says, “But teacher, I think the answer is nine.” Another student, Ben B., chimed in and said, “Actually I think the answer is fifteen.” Pretty soon Joe, Nancy, Harry, Piers, and others are shouting out answers which are quite different from yours. Now you are confused because it is unfathomable how you could spend money but end up with more than you had originally.

Back to the present. Congratulations. You have just learned the basic principles of Keynesian Economics. I hope you are happy to hear that our president and many members of congress believe in economic solutions to problems like the one that was just presented.

We currently have a big problem in our government, well in reality a lot more than one, but one of the main issues is definitely spending. Our government spends way more than it should, and as a result our economy suffers and we find ourselves approaching 17 Trillion Dollars in debt. One of the main problems is that so many people in our government believe in economic theories like Keynesian Economics. People believe that spending money will somehow spur economic growth or “jump start the economy”. Based on what I like to call common sense, this theory miserably fails. If you want proof, look at the Credit Industry. The credit industry takes advantage of unaware consumers by giving them the fake guarantee that they can spend as much as they like with no consequences. Little do they know that sometime they will have to pay off all that money they spent on that new Cadillac, and as a result many members of the middle and lowers class find themselves knee-deep in debt. And like people who tend to live outside their means, America also finds itself knee deep in debt.

One of the main components of our spending problem is bailouts. A bailout is money that the government gives to a bank in a time of need. The majority of banks who receive bailouts either pay the money back, but then require a second bailout or they don’t pay it back at all. In Obama’s first term, the federal government spent a total of 11 Trillion dollars on bailouts. Obama’s economic plan obviously has not worked. What we need to do is significantly reduce the amount of money we spend on bailouts.

One part of Obama’s economic plan is major support for the Federal Reserve. The Federal Reserve or ‘The Fed’ is a government institution which basically acts as a giant government bank. The sad thing is not many people know what The Fed is. The Federal Reserve spent over half of the total money on bailouts at 6 Trillion dollars. The bad part is The Fed does not even need congressional or executive consent to spent money. The Federal Reserve can just spend and print whatever amount it wants. Printing and spending money simply does not work. The Wiemar Republic (what Germany had before the Nazi Regime) attempted to print an excessive amount of money to pay of its World War I debt and as a result their inflation rate was the highest the world has ever seen. Also Thomas Jefferson and Andrew Jackson, two of our nation’s most esteemed presidents, opposed similar institutions to The Fed (the 1st and 2nd National Banks respectively). They also did not trust these institutions at all. Andrew Jackson even stooped as low as calling the members of the 2nd National Bank “A den of Vipers and Thieves”.

Another aspect of his budget Obama is really pushing for is to raise the debt ceiling. The Debt Ceiling is basically the amount of money the government can spend in a year, and raising the debt ceiling increases the amount of money the government can spend. Again, economic tactics such as these do not work. The founding fathers did not want the government to pick winners and losers. When you spend money frivolously, you do not get money back. What we need to do is balance our budget, not make it imbalanced. Even more unreasonable, many people including Democrat leader Nancy Pelosi are advising the president to use an executive order to raise the debt ceiling. Nice Nancy, ruin or economy and shred our Constitution in one simple action.

It appears some of the people in our government need to retake 1st grade math. We do not need to take risks investing in greedy corporations in banks. We do not need the Federal Reserve printing 85 Billion dollars a month and buying 40 Billion a month in mortgage securities. We need to cut spending, balance the budget, and end almost all of the bailouts. If we do this, we will transfer into a period of economic recovery. If not, I am not sure I want to see the effects.

 

 

Views expressed are not endorsed or put forward by Turning Point USA

Comments

  1. NinKenDo says:

    “end almost all of the bailouts”

    Seriously? How much is almost? So we should end them all, except the ones the author thinks are good.

    Right…

    • While I am opposed to bailouts, I do acknowledge that they sometimes work. Bailouts can sometimes be used to save a vital part of the US Economy (General Motors, Detroit). I am still not sure if I support bailouts like these, but I would argue that most people do support them. So basically I said “almost all” rather than “all” because if we end almost all of the bailouts, we should see immediate economic benefits. We can worry about cutting the rest of the bailouts later, but action needs to be taken ASAP.

      I hope this helped.

    • While I am opposed to bailouts, I do acknowledge that they sometimes work. Bailouts can sometimes be used to save a vital part of the US Economy (General Motors, Detroit). I am still not sure if I support bailouts like these, but I would argue that most people do support them. So basically I said “almost all” rather than “all” because if we end almost all of the bailouts, we should see immediate economic benefits. We can worry about cutting the rest of the bailouts later, but action needs to be taken ASAP.

      I hope this helped.

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