The Freeman today has this outstanding piece which succinctly makes the case for why the current wave of Keynesian thinking leads to terrible policy.
This passage is especially insightful:
government should spend the “stimulus” money. But to a good Keynesian, this must
be frustrating because it really doesn’t matter how the money is spent, as long
as the government spends it–and quickly. For a long while I thought the
Keynesian theory was surely more nuanced than that. But I was wrong. I recently
listened to a podcast conversation between Russell Roberts and Keynesian
Professor Steve Fazzari of Washington University during which Fazzari said that
paying people to dig and fill holes would be just as effective as any other
spending program. The point, he emphasized, is to increase aggregate demand.
(Don’t take my word for it. Listen for
Usually the "government could just pay people to dig and fill holes" scenario is used by free market economists to mock the Keynesian mindset. Who knew they actually believed it! This is the kind of theoretical foundation driving the spending of nearly a trillion of your tax dollars. Truly frightening.
Further, the article warns of the long-term effects of this panic-induced spending spree:
Moreover, since the Federal Reserve will monetize the debt by continuing to
expand the money supply, it will set in motion all the evils that accompany
inflation: investment and price distortions, wealth transfers, and calculational
chaos. Any short-term illusion of recovery will be paid for with a new crisis up
Just as the easy credit, monetary expansion policies implemented to "stimulate" us out of the 2001-02 recession lead to the even larger recession we are in today; the policies being lauded as "saving" the economy now will only lead to a deeper and more severe recession in the future.