Slowdown in Growth Is Becoming a Concern - WSJ.com

FRIEDMAN, KEYNES AND LAFFER - WHO'S RIGHT? Slowdown in Growth Is Becoming a Concern - WSJ.com

One might suggest that the media and consumers should recognize that Obama's hope that things are 'different this time' is the proverbial definition of an idiot (when you keep doing the same things and expect a different result).

First, he should also recognize we have a bifurcated economy where skills and education are in high demand and have rising salaries and low unemployment.

With policies that are anti-business, pro-union, pro-entitlements, geared to higher and higher shares of GDP being spent on entitlement consumption (read: high taxes, etc.), then is it any wonder that the economy is not recovering as it would be without these job-growth-constraining policies?

History is a very good teacher - as long as one looks in the right place. An example is the monetary vs. tax rate changes debate over causes of the 1930's depression.

Milton Friedman posited that the length of the Depression was due to the tightening of the money supply. Keynes argued that it was due to a lack of demand. Arthur Laffer points to the increasingly higher tax rates during the Depression.

Clearly Bernanke and Obama are of the Friedman and Keynes schools. And, both of their policy choices run in 180 degrees the opposite direction from Laffer's position.

If we open our eyes, it would seem as though Bernanke's and Obama's policies are/have failed. In fact, as discussed, they are causing their own problems.

No one knows how it will all play out; however, it is usually the case that when major changes need to be made, the investment dollars need to be allocated to help make these changes. This includes a review of policies and procedures that suck away the dollars needed to make these investments, as well as changes to policies to speed up the impact of the investments.

Again, if one believes in Keynes, one doesn't invest in the economy, one invests in consumer spending - i.e. Obama and Democrats.

Along with the dilemma created by focusing on Keynes-type solutions, Obama is telling the average Joe and Jane on the street - especially, if they are retired - that more taxes (read: anti-Laffer) will solve the problem of keeping their entitlements at current levels.

Thus, the public is encouraged to believe things need not change and the policymakers of the left believe things will turn out differently this time. Not a very sanguine prescription.