“America is becoming a third world country when it comes to its roads, bridges, and airports.” — Jimmy Rogers
I currently am working on a paper for Australian economics professor Steven Kates, who is editing a volume called “What’s Wrong with Keynesian Economics?”
The answer is “plenty.” One of the biggest problems with Keynesian economics — named after the 20th century British economist John Maynard Keynes — is its focus only on the short term. Keynes didn’t worry much about the long run. He famously said, “In the long run, we are all dead.” But in the short run, we are alive, and in the long run, our children and grandchildren are alive and have to live with the decisions we make now.
The great management guru Peter Drucker blamed Keynesianism for an unhealthy anti-saving mythology, causing “undersaving on a massive scale” among the western nations, especially the United States. Moreover, he said, “Keynes is in large measure responsible for the extreme short-term focus of modern politics, of modern economics, and of modern business… Short-run, clever, brilliant economics — and short-run, clever, brilliant politics — have become bankrupt.”
Under a Keynesian mindset, we have wonderful shopping malls, but poor roads and infrastructure to get to the malls. When was the last time you saw a pothole in Switzerland or Germany? Yet, according to Robert Poole, Jr., Reason Foundation’s expert on roads and infrastructure, half our roads in this country are substandard. Our airports, from Los Angeles to New York, are antiquated and can’t hold a candle to the beautiful structures built in China, South Korea and other parts of Asia.
We have generous pension programs for the current retired government employees, but our children and grandchildren face the heavy burden of financing billions, if not trillions, of dollars in unfunded liabilities.
Former Social Security/Medicare Trustee Tom Saving (an economist at Texas A&M University) and his colleague Andy Rettenmaier have analyzed the most recent Trustees’ report. Looking indefinitely into the future, the unfunded liability in both programs is $72 trillion! And that assumes the Medicare cuts legislated by ObamaCare hold fast. If they don’t, the unfunded debt will exceed $100 trillion — about six times the size of the entire economy.
Larry Kotlikoff has calculated that expected Social Security benefits for a 62-year-old couple with average income are worth $1.2 million today. And that’s with early retirement. If the couple delays claiming benefits until age 70, their Social Security wealth is worth $1.7 million. Add in Medicare, and the total is well above $2 million. Most retirees are entitlement millionaires, even if they don’t have a penny in the bank.
But Keynesians don’t care. All they are interested in is now — the current recipients. When our children and grandchildren face the music, the current crop of politicians will be dead and don’t care about the long term.
You Blew It! Single-Payer Healthcare System Works in Canada?
“As far as single payer, it works in Canada, it works incredibly well in Scotland.” — Donald Trump
I was criticized for inviting Donald Trump to speak at FreedomFest this year because “he’s not a libertarian.” True enough, but we’re a big tent in the freedom movement, and our 2,500 attendees wanted to hear what he had to say, whether they agreed with him or not. I invite you to watch the full speech.
In that speech, Trump adopted his typical stance about preventing other countries’ criminals from entering the United States illegally across the Mexican border. I agree with his criticism of ObamaCare, which is expensive and goes against many market principles. Fortunately, he did not get around to singing the praises of socialized medicine as he during the Aug. 6 Fox News presidential debate. There he said that the government-controlled, “free” medical care system in Canada and Scotland works. Say again?
The Canadian healthcare system works fine until you have a serious illness or need surgery. Wait times for knee or back surgery is 42 weeks on average, for example. Many Canadians know this stark reality and schedule trips south to the United States to have the surgery done there.
Martin Samuels, the founder of the neurology department at Harvard’s Brigham and Women’s Hospital, found this out when he worked as a visiting professor in Canada. “The reason the Canadian health care system works as well as it does (and that is not by any means optimal) is because 90% of the population is within driving distance of the United States where the privately insured can be Seattled, Minneapolised, Mayoed, Detroited, Chicagoed, Clevelanded and Buffaloed,” Samuels wrote recently in Forbes.
But things are worse in Scotland, where your chances of surviving cancer are much lower than in the United States, for example. But that’s another story.
Upcoming Appearance
I’ll be traveling to Portland, Oregon, for my 50th high school reunion at Sunset High. The Cascade Policy Institute, a free-market think tank in Oregon, has invited me to give a luncheon lecture on Friday, Aug. 14, at Ernesto’s Italian Restaurant, and has invited my subscribers to attend. I look forward to seeing you there. The topic will be “What Really Drives the Economy? Why are Some Countries Rich and Others Poor?” The answer may surprise you. The cost is only $18, which includes lunch. To attend, click here, call Steven Buckstein at 1-503-242-0900 or email him at steven@cascadepolicy.org.
In case you missed it, I encourage you to read my e-letter column from last week about the state of the oil market. I also invite you to comment in the space provided below.
