Keynes vs. Friedman

Paul Krugman writes that we may well be getting into the Great Depression II.  This is troubling news.  It will depend on how well and how smartly Congress will work together with President Obama in the coming weeks. This is indeed a challenge, as we all know how poorly Congress has learned to work together in the past.  In fact, they have been so incredibly short-sighted and self-serving that it is a small miracle the government is still functional (well, sort of).

Krugman compares Milton Friedman's economic principles to those of John Maynard Keynes.  It is very interesting to me in light of reading Naomi Klein's book, The Shock Doctrine.  I hope we can all say goodbye and adios to Mr. Friedman for good.  Below is a quote from Krugman's text.  

--- T

Friedman’s claim that monetary policy could have prevented the Great Depression was an attempt to refute the analysis of John Maynard Keynes, who argued that monetary policy is ineffective under depression conditions and that fiscal policy -- large-scale deficit spending by the government -- is needed to fight mass unemployment. The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Mr. Obama’s plans to rescue the economy.

News reports say that Democrats hope to pass an economic plan with broad bipartisan support. Good luck with that...

In reality, the political posturing has already started, with Republican leaders setting up roadblocks to stimulus legislation while posing as the champions of careful Congressional deliberation -- which is pretty rich considering their party’s behavior over the past eight years.

More broadly, after decades of declaring that government is the problem, not the solution, not to mention reviling both Keynesian economics and the New Deal, most Republicans aren’t going to accept the need for a big-spending, F.D.R.-type solution to the economic crisis.

The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs -- a burden of proof never imposed on proposals for tax cuts.