While going through some old files, a scholar at the Treasury Department made a remarkable discovery: an original transcript of the Bretton Woods conference. (Was it in the same room where the Federal Government has the Ark of the Covenant boarded up? Some things we will never know.) Bretton Woods marks the founding of the modern international financial system, conducted between 44 different Allied nations in the final years of World War II.
John Maynard Keynes, the delegate from Great Britain, is widely considered the most influential economist of the 20th century and the architect of Bretton Woods. In these transcripts, scholars are treated to new words of Keynes, if not explicitly new ideas. He advocated deficit spending during a recession and higher taxes during economic booms to smooth out the natural peaks and valleys of a capitalistic economy. He is widely regarded as a centrist and his work has been the mainstay of modern economic policy, all of this without controversy until now.
While scholars in the Treasury Department remember Keynes as reassuring, seeing as modern politicians seem to have forgotten him entirely.
Instead of talking about stimulus spending, any discussion of the economy this election cycle has been dominated by talk of deficit-reduction. Keynes is surely rolling in his grave. During the greatest economic crisis since the Great Depression, American politicians are targeting deficit spending. How did it get this way?
Republican obstructionism in Congress for the past four years has made it resoundingly clear, more stimulus spending is not politically feasible. That Obama can only throw up his hands and wish for another jobs bill seems insane. Republicans’ answer, then, has been to revert to the backwards policies of trickle-down economics. Though they talk less of “burdening job creators” than they did in 2010, it remains a common contention in the Republican Party that the economy would improve if only the government shrank. It’s as though the mortgage collapse happened because of too much regulation, not too little.
At the same time, this kind of discourse has even forced the Democrats to acknowledge a need to work on deficit reduction immediately. That the legislation setting in place the dreaded Fiscal Cliff was able to get passed speaks volumes about our current political climate.
The Fiscal Cliff represents the greatest threat to a sustained economic recovery. It holds hostage our collective well being to the claim that holding debt is morally wrong. I would argue that a policy threatening to vastly increase unemployment virtually overnight is immoral, and it is certainly bad economic policy.
Both presidential candidates acknowledge the need to reduce the deficit (one of Obama’s main lines of attack is that Romney’s plan does not add up to such a reduction), but also give lip service to Keynes. We live in an era of double think, where we can reduce the deficit and help boost the economy at the same time. I’m not so sure that Keynes — or any reasonable person — would think that possible.
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