- Cafe Hayek - https://cafehayek.com -

On the Keynesian Superstition

Tweet [1]

My colleague Tom Hazlett and the always-insightful George Bittlingmayer offer excellent reasons why it is a (Keynesian) superstition to believe that today's so-called "stimulus" spending will help the economy [2].  Here are a sample couple of paragraphs:

If historic U.S. budget deficits are any indication, the economy is
already “stimulated.” The predicted 2009 federal deficit stood at 8.3%
of GDP before Obama’s package sent it to about 12%. This is a stunning
level of debt, double the previous post WWII high when Reagan’s 1983
budget deficit amounted to 6% of GDP. That time around, the 10.8%
unemployment rate, the worst since the Great Depression, was soon

Keynesians claim that the Reagan boom was an outcome of just this
deficit strategy; for sake of argument, let us assume the Keynesian
position. Reagan’s budget deficit, half the size of Obama’s as a
fraction of GDP, was able to pull the economy out of an unemployment
trough deeper than the 7.6% hole we’re in today.

Share [3] Tweet [4] Share [5] Email [6] Print [7]