[quote=SK in CV][In the last 2 weeks I’ve spoken with 3 CFOs and CIOs for billion dollar companies. All had proposals in their hands for us to do work for them. All 3 said their plans had been put on hold despite issuing RFPs with immediate start dates within the last quarter. All 3 said their plans had been put on hold because of uncertain consumer demand. Not regulations. Not health care reform. Not tax uncertainty. Not political uncertainty. Businesses deal with government demands. It can eat into their margins. But it doesn’t keep them from doing business. Lack of customers does.
As to the high unemployment that remained in 1939, you conveniently didn’t mention Roosevelt’s mistake in ’37, which was instrumental in creating a new recession. Wasn’t very Keynesian of him.
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You are kind of making my point here, SK. The lack of consumer demand your clients cite is because of a lack of jobs, no confidence by consumers and businesses in the future, and a fear that the failed policies of the past few years will merely be increased. The very “stimulus” programs that have indeed pumped money into the economy–in great part to failed programs and wasteful bailouts–have cast a dark cloud over investors and consumers. The Keynesian multiplier that arguably worked somewhat during the Depression is now nearly nonexistent. But the negative incentive and confidence effects of this “stimulus” are very real and offset any multiplier benefits.
BTW, Republicans can be just as guilty of an over-reliance on Keynesian economics as Democrats. The regulatory burden of Sarbanes-Oxley was passed, I believe, during the Bush presidency, and we know much of the stimulus was begun in his last months in office before being continued and greatly increased under Obama.
As to the “mistake” of FDR that led to a second phase of the Great Depression, perhaps you are referring to his attempt to “pack” the Supreme Court by boosting its membership so as to make it more compliant with his more extreme proposals, which by then were getting quite alarming to the general public. In fact, his business bashing did a lot to sap employment throughout the 1930s, and even Keynes advised FDR and his Treasury Secretary to ease up on the rhetoric if the US wanted to see a recovery. As Keynes put it, you need to preserve “animal spirits” in order to keep capitalism going.
BTW, Keynes was generally for a balanced budget over the course of business cycles. He felt governments should maintain surpluses during good times and run deficits during recessions. His revolutionary thought at the onset of the Depression was to deliberately run an excess of government spending over tax revenues. IOW, deficits are OK. But he would be appalled at our current 40% of government outlays being borrowed now, with little hope of a balanced budget in the future.
