Did Keynesian Economics Fail?
October 11, 2010 Leave a comment
I admit it. I am a Keynesian economist frustrated that the Bush/Obama administrations didn’t spend more to counter balance the Great Recession. If you think that they spent too much, that the spending hurt the economy, then read the following and the full article.
In short, a lot of the spending was for low impact activities and it was small.
Here’s the narrative you hear everywhere: President Obama has presided over a huge expansion of government, but unemployment has remained high. And this proves that government spending can’t create jobs.
Here’s what you need to know: The whole story is a myth. There never was a big expansion of government spending. In fact, that has been the key problem with economic policy in the Obama years: we never had the kind of fiscal expansion that might have created the millions of jobs we need.
The Chinese government, for example, spent about $500 billion for a stimulus package in a much smaller economy. (The Chinese economy is about 40% to 50% of ours measured in real terms and their per capita GDP is about 10 percent of ours.)