During the last four years we witnessed the return of free lunch economics with easily predictable results. In early 2008 President Bush threw a Hail Mary pass in an attempt to avoid the coming recession by putting "tax rebate" cash in the hands of the consumer, supposedly to "boost aggregate demand." Later that year, a bipartisan plot in Congress blessed the joint efforts of the Treasury and the Federal Reserve Board to bail out indiscriminately all corporations considered "too big to fail"-the good with the bad plus a few ugly ones. A few months later, an enthusiastic new president eloquently persuaded his troops on Capitol Hill to pass a "stimulus" bill in order to prevent the loss of existing jobs and "create" new ones.
The retro-Keynesian gimmicks promised 3 million jobs. Instead, by following the advice of our "defunct economists" we added $3 trillion in debt and set a post-Great Depression record of keeping the unemployment rate above 9 percent for 21 months in a row. Even if the causality between the stimulus spending and the appearance of 3 million private sector jobs existed today outside of Paul Krugman's imagination, am I the only one who thinks that $1 million per job is a bit extravagant?
One of my readers called President Obama's "blueprint" for America a "redprint." Another labeled it a "black eye." Obama's only consolation is that FDR's New Deal did even worse than the American Recovery and Reinvestment Act, never bringing unemployment below 20 percent. It was Henry Morgenthau Jr., President Roosevelt's Treasury secretary and chief architect of the 1930s jobs bills, who admitted, "We are spending more than we have ever spent before and it does not work … after eight years of this administration we have just as much unemployment as when we started. … And an enormous debt to boot!"
Considering the pitiful performance of the United State's economy under the inept leadership of the White House and a gridlocked Congress plus the "quantitative easings" of the Fed, one wonders why any sane investor would still want to put his eggs in our basket. The truth behind the current low interest rates on our federal government's IOUs is not flattering: We are simply the least ugly girl at the ball. Having fooled Europe into buying the toxic assets from our state-sponsored housing bubble, we added insult to injury by setting a bad example of implementing Keynesian fixes for their already heavily indebted and over-regulated economies. It was the American-dominated International Monetary Fund and World Bank that pushed for expansionary fiscal policies in the EU zone, obliterating the confidence of the bond speculators in the ability of many European governments to stay solvent.
But there is a silver lining around the dark clouds that we have brought on ourselves. I am tempted to interpret the recent austerity measures in Europe and the sweeping changes in our domestic intellectual climate and political landscape as signs that the return to Keynesian economics may have been successfully sabotaged. And, God willing, those policies could be put on hold again for another 30 years until a new generation born into prosperity and ignorance of 20th century history gets elected to power in the midst of economic troubles.