Why Do They Demonize Paul Ryan's Budget?

In its analysis of the intellectual foundations of Paul Ryan's budget, the Economist recently snifffed rather haughtily at his anti-Keynesian thrust. To question Keynes in certain circles is like questioning whether the ban on cannibalism in civilized societies is really a good thing. This got me to thinking about why this is so. Here is my theory.

Keynesian economic theory says that in an economic downturn the government should borrow money to spend on infastructure projects to put people to work and stimulate the economy. Then, when the business cycle turns upward and the economy is growing the government should pay off the accumulated debt by running budgetary surpluses. This cyclical debt is harmless and actually helpful in smoothing out the highs and lows of capitalism for ordinary people who would otherwise be battered by the boom and bust cycle necessary for any economy in which profit and loss provides the necessary discipline for growth and productivity (and the accompanying increase in the standard of living) to occur. All this sounds pretty good in theory. Of course, politics never happens just in theory.

Keynes proposed his theories in the 1930s and prior to that point, debt had been a dirty word for responsible business and government leaders. But as Keynes ideas caught on, debt became more and more thinkable and defensible.

The socialists smelled an opening here - a chink in the capitalist armor - and decided to exploit it. Since capitalists in the first half of the twentieth century were worried about how to contain Marxist radicalism and keep the working classes from revolution, and since deficit spending could help accomplish this goal, Keynes' theories were widely accepted.

Or, rather, they were half-accepted. At the same time as Keynes' ideas became popular the progressive elites who had been part of Wilson's "war socialism" were drooling about the prospects for implementing a Bismarkian welfare state idea in America. FDR's New Deal was the attempt to accomplish this goal by not letting a crisis go to waste. (In other words, use the crisis as cover to implement the agenda you had prior to the crisis.)

Keynes' argument for deficit spending in low economic times was just the rationale needed for creating huge entitlement programs for wealth redistribution during the Great Depression. Under the guise of "fighting" the Depression, the New Dealers used the Great Depression as cover to advance their essentially socialist welfare state ideas. It was creeping socialism without revolution.

The problem was that a key aspect of Keynes' theory was not implemented. That would be the part about the spending being only temporary. Keynes envisioned the government spending money on building bridges, paving roads, renovating schools etc. This type of spending could be turned off and on like a spigot. As soon as the economy recovered the government could turn off the spending spigot and increasing tax revenues due to increased economic activity would soon produce surpluses and allow the debt to be paid down.

But what if the spigot could never be turned off? What if the spending was not on bridges and roads but on social security and other entitlement programs that were designed to permanently redistribute wealth?

When the Republicans sound the alarm about the out of control budget deficits that threaten to destroy the US economy, what do the Democrats always say? They say that if you cut government spending during a fragile economic recovery you will harm the economy and increase unemployment. They act as if they were Keynesians and all these entitlement programs and unfunded pension liabilities due to irresponsible deals made by politicians in the past with public sector unions in order to get elected were just temporary spending designed to smooth out the recession.

But this is fundamentally dishonest. What Paul Ryan is on about has nothing to do with Keynesianism at all. He is not talking about temporary stimulus packages, but about on-going liabilities incurred by federal and state governments that are beyond the ability of government to fulfill. He is talking about the drive to ruinous, European-style, socialism under the cover of Keynesianism.

Paul Ryan is not against a modest welfare state with a basic social safety net for the needy; in fact, he wants to save the safety net by reforming and making sustainable the welfare state. What he is against is universal government programs designed, not to protect the needy, but to redistribute wealth according to the preferences of a cultural elite committed to a Marxist ideal of equality.

One of the ironies here is that Obama's plan will hurt the poor far more than Ryan's will because Obama's plan bankrupts the nation and that means the destruction, or drastic scaling back, of the social safety net. Ryan is trying to protect that safety net. Of course, the total spending goes down: that is the whole point. But the truly needy don't receive less; only the rich and the middle class do. It is not balancing the budget on the backs of the poor and the sick, but on the back of universality. And Democrats care more about universality than they do about the poor. It is the ideal that they worship.

The Democrats bang on about how the Republicans only care about helping the well to do. But the Republicans are asking: "Why should the millionaires and billionaires get welfare?" Instead of increasing their taxes and then exempting your cronies from paying those taxes via loopholes, why not reduce taxes and eliminate loopholes?

The Democrats want higher taxes so they can have government control of the lives of citizens. Helping the poor is just the excuse. It is that behind which they hide their true agenda. Their true agenda is social engineering and income redistribution in the name of romantic and Utopian ideals of equality. Paul Ryan's true sin in the eyes of the cultural elites is to challenge those sacred cows.