During the Great Depression, economist John Maynard Keynes recommended increasing federal government spending, financed by borrowing, to boost the U.S. economy. It didn’t matter how the new money was spent. If no better use could be found, Keynes suggested building pyramids.
Keynes’ theory that increased public spending would offset declines in consumer and business spending proved wrong. The unemployment rate remained in double digits until the “Greatest Generation” was called upon to sacrifice its blood and treasure to defeat the Axis powers in WWII.
The failure of Keynesian pump-priming seems to be lost on recent White House occupants. George W. Bush twice tried to stimulate the economy, once after 9/11 and again in the early days of the recent financial crisis.
His efforts show up as little more than a blip on U.S. gross domestic product growth.
President Barack Obama has tried more of the same—with no greater success. He claimed the American Recovery and Reinvestment Act would boost the economy and “save or create” millions of jobs. The chairwoman of his Council of Economic Advisers promised the unemployment rate would never rise above 8 percent.
President Bush’s stimulus initiatives cost about $200 billion each; the Obama administration’s first attempt to turn the economy around cost $868 billion. Now there’s foolish talk of more.
Although the president tries to put the best face possible on the current economic mess, he surely realizes that, besides new green signs along highways and at construction sites advertising projects funded by the American people, there is little or no evidence his stimulus has made much difference.
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