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Category of Expertise:

Business & Finance

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Author of Armchair Politics

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Expert

Published:

11/16/2011 03:13pm
Logenomics

An excerpt from the book "Armchair Politics"

-A Jobs Bill by Changing the Way We Do Things-
To better understand where we need this economy to go, it makes sense to understand how we got here as well. I’ll be the first to admit that I am not an
economist, and even though I had an interest in micro and macro economics in college, I know I will never be considered a world renowned expert. In fact,
I spent the better part of Microeconomics trying to get the courage to ask a girl out on a date. However, even with a basic understanding, it is not difficult
to see that there are two main themes that politicians like to advertise; Keynesian economics and Supply Side economics. In the following sections, I will
go into some detail regarding each and point out how in my opinion, neither are working or has worked as intended.
Keynesian Economics
John Keynes was a 20th century economist who believed that the private sector didn’t always do the right thing and in times will become inefficient.
During these times of inefficiency, the government would have a vested interest to initiate an active monetary policy that would help smooth out the speed
bumps in an overactive business cycle. Steps taken in this form of monetary policy could be as follows:
- Increase the money supply to stimulate the economy
- Keep interest rates low to encourage investment
Thoughts on Keynesian Economics: Along with these steps of interventions, I also believe that there is one fundamental parameter that is an absolutely
necessity for this theory to work as intended, and that is that our country needs to be running a trade surplus, not deficit. We are currently running at
approximately $1 Trillion dollar trade deficit, and this is exactly the reason why we have not successfully been able to stimulate the economy. Without a
trade surplus, we are simply increasing the money supply and then shipping it off to another country instead of taking advantage of the multiplier effect
(Geoghegan Thomas, "What Would Keynes Do?" The Nation, Oct 17 2011). The multiplier effect which I’ll explain in the next section is also a key to a
successful Keynesian policy.
Multiplier Effect
Remember those rebate checks we got when President Bush was in office? That is a form of Keynesian policy, the government sent out checks to
everyone in hopes that they would buy products that would stimulate the economy. More products off the shelves equals more demand, more demand
equals more jobs, more jobs equals more taxes paid to the government (social security and Medicare as well, but that’s a separate topic, remember
everything is connected), more taxes paid to the government helps pay off the rebates that were sent out. This is called the multiplier effect and it
basically shows how the same dollar can be re-used over and over again.
A perfect example of the multiplier effect is when smaller communities learn that keeping it local is the only way for them to survive. Growing up in a small
town, Crosby ND, everyone always talked about keeping things local. My parents owned a local drug store and when someone came in for a prescription
they would need to fork over some money. Some of that money was then taken to the bank, sometimes by me on Saturday’s. The bank would receive
that deposit, and in turn use that money to make a loan to somebody else. That loan could be used to start a business and the cycle would then start over
again. If we are going to get back to a prosperous nation, then I believe that we need to take that same belief that rural communities use and expand it to
a national level. Keep it national, or in other words, Made in the USA. This isn’t rocket science or something new; it’s getting back to basics.
Failed Keynesian Policies: Getting back to the rebates, the lack of the multiplier effect is exactly why things went wrong. People bought products alright,
demand definitely grew, and jobs definitely were created. However, all of this took place in other countries. We didn’t help out everyday Americans
looking for jobs b

Keywords

economy, economics, jobs, unemployment, free trade, illegal immigration
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