From the beginning, our representatives in Washington have approached this economic downturn with old-fashioned, Keynesian economics. Keynesianism—named after the British economist John Maynard Keynes—is the theory that you fight an economic downturn by pumping money into the economy to “encourage demand” and “create jobs.” The result of our recent Keynesian stimulus bills? The longest recession since World War II—21 months and counting—with no clear end in sight. Borrowing close to a trillion dollars out of the private economy to increase government spending by close to a trillion dollars does nothing to increase incentives for investment and entrepreneurship.
The record speaks for itself: In February 2008, President George W. Bush cut a deal with congressional Democrats to pass a $152 billion Keynesian stimulus bill based on countering the recession with increased deficits. The centerpiece was a tax rebate of up to $600 per person, which had no significant effect on economic incentives, as reductions in tax rates do.
Learning nothing from this Keynesian failure, which he vigorously supported from the U.S. Senate, President Barack Obama came back in February 2009 to support a $787 billion, purely Keynesian stimulus bill.
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Keynes had way too much trust in the government’s ability to manage the economy. However he gets a bum rap on his stimulus ideas because we forget about part 2 of his theory which is:
After government creates some spending that the consumers have walked away from during a recession, when the consumer regains confidence and comes back into the markets, then the government should stop the spending and run a surplus to repay any debt that was created to stimulate.
PMSH plans on doing part 2. We can debate whether he will balance the budget fast enough. If we have an election we can give him a majority and pray he shrinks Ottawa and leaves more taxing ability locally, where we can see it and monitor it and better judge the accountability of governments spending our money.
So basically, Keynes’ theory was to be a “tax and spend” liberal? I knew there was a reason why I disliked Keynesian economics!!