Dear Friends,
It seems to me, this election season, in the US, is another example of the electorate searching for leaders, that actually follow the American ethos. So far, both political parties have run as neo-conservatives, (people who want to conserve the modern liberal democracy and market system as opposed to traditional European conservatives who want(ed) to conserve the feudal system), But when they get into power they rule as neo-liberals, (anti capitalist pro government people, who hold the average citizen to be a mouth breathing fool, needing to be controlled).
Take the Republican party running in 2000. They ran on a platform of tax cuts and further fiscal tightening. After they got the victory, the economy went into recession, as a result of the overbuilding of infrastructure in the years before Y2K. Once the Millennium passed and the World’s computer networks didn’t crash, there was no need of more technology upgrades until the newly purchased equipment was obsolete, collapsing the demand for technology
The republicans passed tax cuts as “stimulus” and spent money to keep up aggregate demand, per the Keynesian model. Their following the liberal model of economic stimulus worked to some extent in that the economy did expand at a fast rate until 2007. But shortsighted regulation, causing bubbles to form, driving up energy costs and thus unbalancing the economy, made conditions perfect for a recession. The inevitable, (due to regulation), huge spike in energy costs provided the trigger and the World economy went into recession.
In the 2008 election season the democrats campaigned that the republicans had spent the American people into the poor house. That the democrats could repair the economy in short order. No real plan was put forth but vague talking points like middle class tax cuts and rhetoric about fairness. The democrats were elected in a landslide. Their demi-conservative message and their cult of personality leader generating the momentum.
As soon as the democrats regained “their” power they raised taxes on the poor in the form of cigarette tax increase. The wave of spending, regulation, usurping of rights and outright corruption, in only 2 years back in power have turned the stomachs of the American people. Now the American people are looking for someone who will control taxes… AND spending but most importantly… get the economy back to a healthy growth rate! To do this government must abandon the Keynesian model and go back to the historically effective neo conservative approach. Even if they don’t know, consciously, what that approach is.
Put simply, the neo conservative approach to managing the economy, are to move as close to lasses faire policies as possible, without damaging the interests of the consumer. Lowering regulation would help the economy drastically. Cutting spending would send a signal to markets that the US government will remain solvent, and signal the consumer, that taxes will not need to be raised in the future. Another consequence of lowering government spending is that it will positively impact the US balance of trade. Less government spending means less government demand for foreign capital.
As I have argued many times before in this blog, government demand does not equal consumer demand. So when aggregate demand is driven up by government demand the economy must warp to meet the new demand. It must necessarily turn away from meeting the demands of consumers and business and meet the new government demand. Remember our poor sofa salesman. But when the government cannot keep up it’s demand, the gravy train has to end when government is bankrupt, the economic actors must revert to try to meet consumer demand. Further diminishing the efficiency of economic forces due to the unbalanced situation that government demand puts on an economy.
So, as I have pointed out, the reason the American people are becoming more polarized and more angry, is that both parties, run as neo conservatives… but rule as neo liberals. Regardless of the rhetoric in the elections, the American people have come to believe that their leaders, will act as tax and spend liberals, no matter their party affiliation, because that has been the paradigm.
Will the incoming group behave differently? If history is to tell, then no, they won’t. We can expect spending to accelerate, regulation to be passed without even being read and taxes to rise. The inevitable result will be, diminishing economic growth, creating more anger and polarization of the electorate.
But what would happen if the new bunch actually legislate instead of rule? We can expect vitriol from the unbiased media. We can expect the personal lives of any legislators that buck the system to be destroyed. The entrenched elite will fight to their last breath. They will count on Olson being correct. Making the fight bloody.
But, with this much at stake, I pray the newly elected members of the US congress are true to their word, despite the inevitable personal destruction they will experience for it…
