Halloween has been over for nearly three weeks, but something evil is brewing in the bowels of the Capitol and the basements of Trump Tower. Congressmen and Senators are reading incantations. Government contractors are drawing pentagrams in chalk. Their goal: to resurrect the undead zombie of failed economist, John Maynard Keynes! Get ready to run, it’s stimulus season!
George W. Bush called his $168 billion stimulus a package “a booster shot for our economy.” Barack Obama’s $825 billion stimulus included $90 billion for infrastructure and $32 billion to fortify the electricity grid. Now, it’s 2016, and the incoming administration has floated a $1 trillion dollar spending package to “fix our crumbling infrastructure.” The measure is also seen as a bipartisan outstretch of the hand from the Trump White House to Democratic Congressional Leaders. Republicans should beware the economic consequences of the peace when dealing with the Left.
The truth of the matter is the same today as it was in the 1930’s: Government spending to boost the economy is a Keynesian myth. Conservatives need to beat this zombie back to the bowels of Hades from whence it came.
Proponents of the package see “cheap” money by way of low interest rates as an opportunity to “invest” in infrastructure. From FDR’s New Deal to Obama’s Stimulus, the principles behind government expenditure in the economy comes chapter-and-verse from Keynes’ 1936 opus, the “General Theory of Employment Interest and Money.” Those in favor of the spending truthfully point to areas that have seen neglect, but they refuse to understand that basic laws of economics still apply when calculating the costs of increased deficit spending. Cheap credit and government spending furthers the downward economic spiral we currently find ourselves mired in. Public spending crowds-out private investment in the economy, disrupts capital markets and ultimately decreases our standard of living through the stimulus’ inflationary effects. We need only look to the failed stimuli of the past two administrations to see that this simply doesn’t work. For a more formalistic approach, I recommend picking up a copy of the greatest Keynesian zombie hunter to ever live, Henry Hazlitt, whose The Failure of the New Economics utterly destroys Keynes like a chainsaw through the neck of a brain-devouring monster. Pick up a copy over the holiday weekend, and be the life of party at the Thanksgiving table.