Gov. Brown, Meet Mr. Keynes

California’s Democratic Gov. Jerry Brown, with credibility as a climate-change reformer who travels the world speaking up the state’s carbon-trading policy as a victory for the ecology and humanity, also backs a 2018-19 budget of so-called prudence, or spending austerity. Why? The California economy, the sixth biggest on the planet, will enter a recession in the future, according to him. There is no argument there.

Thus, he seeks to withhold state tax revenue and place it in a “rainy day fund.” Here are the numbers, a proposed withdrawal of $3.5 billion in 2018-19, $2 billion over the rainy day fund’s mandatory $1.5 billion. That adds up to a rainy day fund of $13.5 billion, or 10-percent of the state’s general fund in a state with a $2 trillion economy. So what is not to like?

Given the current boom in the real estate and stock markets, and the GOP tax law shifting capital from the bottom and middle to the top, Brown’s logic is in part spot-on. An economic downturn is ahead. All bubbles burst, an iron “law” of the capitalist economy. All economic expansions become recessions. Regularly, investors fail to predict future demand. Small and mid-size enterprises open. Then they fail. Meanwhile, big banks nosedive. Then they get taxpayer bailouts.

Regularly, supply outstrips demand as night follows day. Expansions and recessions are central to capitalism, how it grows. In other words, California might not have long to wait, as Gov. Brown warns without explaining what drives economic downturns, the system’s heartbeat of capital investment that claims the consumer is queen/king of the marketplace, ignoring the practical and theoretical shortcomings of such a paradigm.

A more clear-eyed view is that of John Maynard Keynes, a top British economist. He proposed government spending to prop up weak consumer demand in the depression decade of the 1930s. That policy saved capitalism then, with federal government spending (especially on armaments to prepare and undertake the Second World War) under FDR a case in point.

Last decade, after the housing boom and bust, government demand-policy strengthened a faltering economy. President Barack Obama’s American Recovery and Reinvestment Act of 2009, cut the monthly six-figure job layoffs of the Great Recession under President George W. Bush in part by helping states fund increased claims for jobless benefits.

Why then does Gov. Brown ignore Keynes’ insights on government or state spending to spur the economy? One reason is that state governments are unable to run deficits in the way that Uncle Sam can. Another is that Gov. Brown is reserving state revenue to repay Wall St. creditors in a downturn. The state issues bonds that these elites hold and push policies that favor their class interests. This is no conspiracy theory, just the everyday workings of public policy in a capitalist society.

Keynes’ views on weak consumption acting as a drag on growth and jobs remains relevant now. In California and across the U.S., pulling in the reins on state spending removes money from the economy. That weakens demand for goods and services and the labor force that delivers them. Reducing the spending that aids enterprises is Gov. Brown’s anti-Keynes, pro-austerity policy for the future, a drag for Main Street but better news for Wall Street. On that note, his 2018-19 budget proposal is contractionary rather than expansionary. Let us be clear about that.

More articles by:

Seth Sandronsky is a Sacramento journalist and member of the freelancers unit of the Pacific Media Workers Guild. Emailsethsandronsky@gmail.com

March 21, 2018
Paul Street
Time is Running Out: Who Will Protect Our Wrecked Democracy from the American Oligarchy?
Mel Goodman
The Great Myth of the So-Called “Adults in the Room”
Chris Floyd
Stumbling Blocks: Tim Kaine and the Bipartisan Abettors of Atrocity
Eric Draitser
The Political Repression of the Radical Left in Crimea
Patrick Cockburn
Erdogan Threatens Wider War Against the Kurds
John Steppling
It is Us
Thomas Knapp
Death Penalty for Drug Dealers? Be Careful What You Wish for, President Trump
Manuel García, Jr.
Why I Am Leftist (Vietnam War)
Isaac Christiansen
A Left Critique of Russiagate
Howard Gregory
The Unemployment Rate is an Inadequate Reporter of U.S. Economic Health
Ramzy Baroud
Who Wants to Kill Palestinian Prime Minister Rami Hamdallah?
Roy Morrison
Trouble Ahead: The Trump Administration at Home and Abroad
Roger Hayden
Too Many Dead Grizzlies
George Wuerthner
The Lessons of the Battle to Save the Ancient Forests of French Pete
Binoy Kampmark
Fictional Free Trade and Permanent Protectionism: Donald Trump’s Economic Orthodoxy
Rivera Sun
Think Outside the Protest Box
March 20, 2018
Jonathan Cook
US Smooths Israel’s Path to Annexing West Bank
Jeffrey St. Clair
How They Sold the Iraq War
Chris Busby
Cancer, George Monbiot and Nuclear Weapons Test Fallout
Nick Alexandrov
Washington’s Invasion of Iraq at Fifteen
David Mattson
Wyoming Plans to Slaughter Grizzly Bears
Paul Edwards
My Lai and the Bad Apples Scam
Julian Vigo
The Privatization of Water and the Impoverishment of the Global South
Mir Alikhan
Trump and Pompeo on Three Issues: Paris, Iran and North Korea
Seiji Yamada
Preparing For Nuclear War is Useless
Gary Leupp
Brennan, Venality and Turpitude
Martha Rosenberg
Why There’s a Boycott of Ben & Jerry’s on World Water Day, March 22
John Pilger
Skripal Case: a Carefully-Constructed Drama?
March 19, 2018
Henry Heller
The Moment of Trump
John Davis
Pristine Buildings, Tarnished Architect
Uri Avnery
The Fake Enemy
Patrick Cockburn
The Fall of Afrin and the Next Phase of the Syrian War
Nick Pemberton
The Democrats Can’t Save Us
Nomi Prins 
Jared Kushner, RIP: a Political Obituary for the President’s Son-in-Law
Georgina Downs
The Double Standards and Hypocrisy of the UK Government Over the ‘Nerve Agent’ Spy Poisoning
Dean Baker
Trump and the Federal Reserve
Colin Todhunter
The Strategy of Tension Towards Russia and the Push to Nuclear War
Kevin Zeese - Margaret Flowers
US Empire on Decline
Ralph Nader
Ahoy America, Give Trump a Taste of His Own Medicine Starting on Trump Imitation Day
Robert Dodge
Eliminate Nuclear Weapons by Divesting from Them
Laura Finley
Shame on You, Katy Perry
Weekend Edition
March 16, 2018
Friday - Sunday
Michael Uhl
The Tip of the Iceberg: My Lai Fifty Years On
Bruce E. Levine
School Shootings: Who to Listen to Instead of Mainstream Shrinks
Mel Goodman
Caveat Emptor: MSNBC and CNN Use CIA Apologists for False Commentary
Paul Street
The Obama Presidency Gets Some Early High Historiography