The Waterloo of Keynesianism (Military and Domestic)

Note: In part, this post is an answer to a query by Mark Hatlie.

This following is an excerpt of a post at the blog of Historians Against the War. Comments are welcome:

While it is perilous for any historian to predict the future, we may well be headed for the Waterloo of Keynesianism (both military and domestic) and that is a good thing.

Crudely put, Keynesianism (so named for the British economist John Maynard Keynes) is the theory that government’s can speed long-term recovery by running high deficits so as to stimulate aggregate demand or investment. It is the entire basis of Obama’s stimulus plan. To some extent, Keynesian ideas were the basis of Bush’s massive bailout and big spending policies, most especially his now forgotten “stimulus checks.”

The popularity of the Keynesian theory is something a puzzle (at least to me). Few ideas more defy ordinary common sense. Taken in today’s context, it seems akin to telling an individual who has recklessly run up a hundred thousand dollar credit card debt to spend even more on fixing a driveway or garage (infrastructure). For some reason, such advice (which would be considered utter lunacy when applied to individuals) is widely accepted as the best method of economic recovery when taken by governments.

Read the rest here.

David T. Beito is a Research Fellow at the Independent Institute, retired professor of history at the University of Alabama, and author of The New Deal’s War on the Bill of Rights: The Untold Story of FDR’s Concentration Camps, Censorship, and Mass Surveillance.
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