President Barack Obama and Speaker of the House Nancy Pelosi are Keynesians

President Barack Obama and Speaker of the House Nancy Pelosi are Keynesians. John Maynard Keynes encouraged deficit spending during economic downturns to increase aggregate demand. This is a hard theory to resist particularly for politicians who address every problem or potential problem with the same solution, to increase the power and size of the government. Keynes postulated that the multiplier effect would boost the economy. President Obama and Speaker Pelosi have stated many times that government money going to people who would immediately spend it was best, that is propensity to consume. So the candlestick maker gets some government money, and spends it promptly buying items from an Indian Chief, who promptly makes purchases from the baker, and on and on. The theory is that the economy grows.

Unbelievably, there is no consensus if President Franklin D. Roosevelt's New Deal Keynesian policies worked. Roosevelt took office March 4, 1933, and five years later the country still had 15% unemployment. Prior to the Great Depression, the U.S. economy suffered numerous financial panics and recessions. Despite little Federal Government intervention, the economy bounced back more quickly. So many economists believe that Roosevelt's Keynesian policies prolonged the Depression and delayed recovery.

More recently, Japan embraced Keynesian policies, primarily “investing” in infrastructure. A 2.4% budget surplus in 1991 turned into a deficit of 4.3% by 1996 and 10% by 1998, with the national debt to GDP ratio reaching over 200%. The Keynesian policies did not work and the two decade period is referred to as Japan’s lost decade.

Of course, if Keynesian theory worked, the government really does have to make payments, it could just drop money from helicopters and the economy would grow. Or the government could hire half the unemployed to dig ditches and then hire the other half to fill the ditches back up. The formerly unemployed having a high propensity to spend would then have the candlestick maker, Indian Chief, and baker’s businesses booming. If Keynesian theory worked, Zimbabwe would be a wealthy country.

During the 1930s depression, President Herbert Hoover and Roosevelt kept on increasing tax rates. Roosevelt kept on increasing regulations. Without certainty and a stable tax and regulatory environment, businesses cannot plan and determine which business expansions or new business enterprises will pencil out. President Obama and Speaker Pelosi have continued these practices. Imagine you have a business idea, and are using a spreadsheet to forecast your projected revenue and expenses. What do you put down as your expenses for taxes, health care costs, and thanks to proposed cap and trade legislation, energy costs?

The Bush tax cuts have been in place for nearly a decade. Some progressives have referred to this as Bush Tax Cuts for the Rich. However, President Obama said in his December 7, 2010 press conference "A typical working family faced a tax increase of over $3,000 on January 1st".

Congress and President Obama have agreed to extend the Bush tax cuts for two years. Hopefully, the Keynesian policies are at an end, and the government has now provided some certainty to taxpayers so entrepreneurs can consider expanding their current business or to start a new business. Let's hope so.

Yours truly,

Gene Felder

NO LAW ABRIDGING POLITICAL SPEECH

U.S. Constitution First Amendment: "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances."
They were talking about political speech, so it is OK to regulate pornography or misleading commercial advertisements.

See http://en.wikipedia.org/wiki/Citizens_United_v._Federal_Election_Commission "One issue in particular that likely contributed to the Court's desire to have the case reargued was the statement by then-Deputy Solicitor General Malcolm L. Stewart, representing the FEC, that the government would have the power to ban books, if those books constituted express advocacy and were published by a corporation or union."

The position of the Obama administration is the government has the right to censure and burn books. That the government allows newspapers to write editorials and endorse candidates, but that the government could withdraw that privilege. The government could make it criminal for a newspaper to write editorials or for endorsing candidates.

Hoover & Roosevelt Tax Increases Prolonged Depression

Let's make permanent the Bush tax cuts. Let's learn from history. President Obama increasing spending and taxes is not the way to get private employers to create jobs and hire employees.

See September 22, 2009 op/ed piece by Taxes, Depression, and Our Current Troubles by Dr. Arthur B. Laffer at http://online.wsj.com/article/SB10001424052970203440104574402822202944230.html

The sub headline is "Tariffs, rising state and federal taxes, and currency devaluation ruined the 1930s, and they could do the same today."

■ "The damage caused by high taxation during the Great Depression is the real lesson we should learn."
■ "The Smoot-Hawley tariff of June 1930 was the catalyst that got the whole process going. It was the largest single increase in taxes on trade during peacetime and precipitated massive retaliation by foreign governments on U.S. products."
■ "Huge federal and state tax increases in 1932 followed the initial decline in the economy thus doubling down on the impact of Smoot-Hawley."
■ "There were additional large tax increases in 1936 and 1937 that were the proximate cause of the economy's relapse in 1937."
■ "beginning in 1932 the lowest personal income tax rate was raised [under Hoover] to 4% from less than one-half of 1% while the highest rate was raised to 63% from 25%."
■ Under Hoover "The corporate rate was raised to 13.75% from 12%. All sorts of Federal excise taxes too numerous to list were raised as well. The highest inheritance tax rate was also raised in 1932 to 45% from 20% and the gift tax was reinstituted with the highest rate set at 33.5%."
■ "In 1934, during the Roosevelt administration, the highest estate tax rate was raised to 60% from 45% and raised again to 70% in 1935. The highest gift tax rate was raised to 45% in 1934 from 33.5% in 1933 and raised again to 52.5% in 1935. The highest corporate tax rate was raised to 15% in 1936 with a surtax on undistributed profits up to 27%."
■ "In 1936 the highest personal income tax rate was raised yet again to 79% from 63%"
■ "in 1937 a 1% employer and a 1% employee tax was placed on all wages up to $3,000."
■ "In 1929, state and local taxes were 7.2% of GDP and then rose to 8.5%, 9.7% and 12.3% for the years 1930, '31 and '32 respectively."
■ "the Bush tax cuts are set to expire in 2011; and additional taxes to pay for health-care and the proposed cap-and-trade scheme are on the horizon."

Jim Hall's Book "Through the Eyes of a Tiger, An Army Flight Surgeon's Vietnam Journal"

I just finished reading a book "Through the Eyes of a Tiger, An Army Flight Surgeon's Vietnam Journal" written by Laguna Beach's own Jim Hall. Heck, I have never addressed Jim as Doctor.

The book is a captivating story of a brand new medical doctor sent to Vietnam for a year 1962-63. This is early in the US’s involvement in the Vietnam War, however, there is plenty of fighting and injuries to attend to. Captain Jay Hoyland (pen name for Laguna Beach's own Jim Hall) is not assigned to a hospital where he can confer and learn from other more experienced doctors, but he is assigned to a base being the only doctor south of Saigon in the Mekong Delta.. As the commanding officer of the lab at the Soc Trang airfield, he has to care for the military at the base including the helicopter pilots who become his best buddies. In addition, he provides the Vietnamese town medical care, inspecting restaurants and the house of prostitution, and assisting the leprosarium and the nuns at the local orphanage.

What a busy year, learning as he tends to the medical needs, from stitching up soldiers getting too close to the base's mascot Taffy the tiger to putting helicopter buddies and a subordinate into body bags, and at the same time, being the chief fundraiser for projects like the officers’ club expansion, a washing machine for the orphanage and more.

I did not have any particular interest in learning about 1962 Vietnam or the adventures of a brand new Army flight surgeon, but what a most remarkable story. That story is written so each page reveals interesting and exciting details with the author sharing his emotions as the ups and downs warrant. Also, the personal narrative is intertwined with official Vietnam progress communiqués which are quite illuminating and particularly so since by the end of 1963 a US acquiesced coup involves the killing of South Vietnam’s President Diem.

I have always known Jim Hall to be a complete gentleman, and now know much more about him and his early accomplishments. A fun and enthralling read.