As the global economy faces the prospect of recession, policymakers and politicians on both sides of the aisle have once again lined up behind Keynesian fiscal stimulus to deliver us from economic evil. But if the past is a guide, the likelihood of deliverance, to put it mildly, is not good.
John Maynard Keynes’s eponymous theory was published in 1936, at which point the Great Depression was several years old. However, President Franklin Roosevelt and Congress had already been injecting large dose
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s of Keynesian medicine into the ailing economy in the form of New Deal spending. The result was a protracted slump.
In fact, after eight years of furiously spending on a cacophony of government programs, unemployment remained in double digits, which led FDR’s New Deal architect and Treasury secretary, Henry Morgenthau, to admit defeat in 1939: “We have tried spending money. We are spending more than we have ever spent before and it does