Top-Down Keynesianism Has Run Its Course

It was run for so long that its side effects are with us now like advanced cancer. It needs to be now buried than rerun.

Paul Krugman is right that "Reagan was a Keynesian". Reagan ran a particular type of Keynesianism called "Supply Side Economics" or what can be called "Top-Down Keynesianism". Dr. Krugman likes to believe that starting a fresh round of it is a great idea, and that's the problem with his writings.

When Reagan actually put his economic paradigm into action, there was scope of benefitting from it, and benefit did reap America. But it was never effectively reversed, and actually put into high gear through 2000s. This has resulted in some very bad side effects.

For one, there is a now a Private Sector that looks for its growth towards Government: Government placing huge orders for stuff it does not need, then the recepient companies of such largesse spend it forth to add employees they do not need (money is already in! so what do you need to up hiring for?), or start projects and procurement they, in turn, do not need. But the first use of the extra cash from Government is to up the compensations of Execs, because its their 'hard work' and connections and arrangements that paid off!
The flow of such money is in sham, with little use and value of the capability of individual workers. The incremental add they can do to the topline pales before what the Execs are extracting from the Government or by being the second or third tier recepients of the largesse flowing from the Top. Additional boost to the bottomline can be arranged as cuts to Corporate Taxes. Accordingly, the colleges have also become money making businesses that extract high fees by admitting whoever can pay them, pulling in an Einstein here and there on scholarship. It does not matter anymore what the median quality of the people a college takes in or graduates, for there isn't much value for competence in a Government insured "Private" sector, so why the heck bother about it, just insisting that "we have the quality goods" is sufficient.

It was pathetic to read 'analysis' in finance press today that analyzed which stocks the writer thought should rise if Obama wins, v/s Romney! Pray, what kind of private sector is that?

Call it Crony Capitalism or Crony Socialism, this is a cancer that leaves an economy weak, and encourages lobbying and sycophancy over skill in production, delivery and sales.

The form of Keynesianism that can be tried is of a bottom-up variety. Spending on public interest goods that the society is short of at the moment: roads; rail links; good, well rounded, Grade School Education; affordable college; firefighters; policemen; and so on. Even a bottom-up Keynesianism has the risk that an overzealous Government will create with it suffocating Bureaucracy and procedures, something that needs to be cut rather than added to.

It's a debate in itself whether this bottom-up Keynesianism can be executed upon by taking on more Public deficit, over what Reaganomics has eventually piled up already, or by rationalizing taxes. However, rerunning or continuing Top-Down Reagan Keynsianism is not a wise option, it needs to be now buried.