The Tea Party has a big problem. It not only has to convince the public that wealth-redistribution is morally wrong and produces bad results. It must persuade those inside the camp. Their name is legion.
I found this out on my own website. I run a website where people can get questions answered. The heart of the site are the two dozen Q&A forums. Here is what happened yesterday.
Someone posted a video of a LKeftist millionaire entrepreneur with a Ph.D. in philosophy. He told us that raising taxes on the rich will not reduce jobs. He is an economic idiot, even though he is a smart businessmen. There are lots of them.
What disturbed me was the reply.
This was posted yesterday, in response to a video talk by a rich Keynesian entrepreneur who says tax cuts will not create jobs. He had a defender.
It is consumers who create demand and therefore jobs. The rich are globalists. They don’t give a rip about the neighborhood or your town or your county. Why should they? “To whom much is given, much is required.” Doesn’t work that way in reality. Creating jobs in China or Mexico does nothing for main street USA where you live. Your neighbor is out of work. He is on unemployment. He ain’t spending. Your Lowe’s store closes. Fewer jobs. More crime. Despair. Divorces. Suicides. If I were hugely wealthy, I would not even live in this country. I’d start a business in NZ and own an estate there.
I am aware of the fact that Keynesianism is the default setting for virtually all Americans who have been through the public school system. I am beginning to think that it is the default setting for almost everyone in the West.
The site member begins with straight Keynesianism: “It is consumers who create demand and therefore jobs. The rich are globalists.” This is the very heart of Keynes’s economics. He began his analysis with the consumer. He assumed that the consumer had come out of nowhere, ready to consume, yet for some reason he was unable to consume. Keynes blamed the refusal of capitalists to invest, to employ unemployed people. He called on the government to borrow money and hire people. Everything centered on increasing demand.
This is what is called demand-side economics. All Keynesianism is demand-side economics.
Keynesianism offers very bad economic analysis. The correct approach is to begin with the producer. This is supply-side economics. All free market economics begins with supply-side principles.
There is no consumption without production. It is not the free market’s fault that some people refuse to work at prevailing wages. That was where Keynes was wrong. There is government interference with pricing. Prices are not allowed to fall and clear the market: match supply and demand.
Consumption must begin with production. There are no free lunches.
When someone buys something from me, he benefits me as a seller. When I buy something from another person, my purchase benefits him. But the central fact is not my purchase. It is rather the production that gave me the money to make the purchase.
Consumption begins with production. There are no free lunches.
(If you want my complete answer to Keynesian economics, click the link.)