In declaring Keynesian economics vindicated I am, of course, at odds with conventional wisdom. In Washington, in particular, the failure of the Obama stimulus package to produce an employment boom is generally seen as having proved that government spending can’t create jobs. But those of us who did the math realized, right from the beginning, that the Recovery and Reinvestment Act of 2009 (more than a third of which, by the way, took the relatively ineffective form of tax cuts) was much too small given the depth of the slump. And we also predicted the resulting political backlash.
So the real test of Keynesian economics hasn’t come from the half-hearted efforts of the U.S. federal government to boost the economy, which were largely offset by cuts at the state and local levels. It has, instead, come from European nations like Greece and Ireland that had to impose savage fiscal austerity as a condition for receiving emergency loans — and have suffered Depression-level economic slumps, with real G.D.P. in both countries down by double digits
This wasn’t supposed to happen, according to the ideology that dominates much of our political discourse. In March 2011, the Republican staff of Congress’s Joint Economic Committee released a report titled “Spend Less, Owe Less, Grow the Economy.” It ridiculed concerns that cutting spending in a slump would worsen that slump, arguing that spending cuts would improve consumer and business confidence, and that this might well lead to faster, not slower, growth.
I've got a metric fuckton of observations that go with this, from "Wouldn't it be neat if Bush et als were big on Hayek back when Bush inherited a budget surplus, so that instead of a tax cut and massive government spending, the house would have been in order for a less-miserable crash that more people could have walked away from?" to ""True stimulus has yet to be tried", to "The operation isn't successful if it's killing the patient". And also "Things cost more because they cost more--not because of inflation right this minute" and also, Atrios makes sense when he talks about free money. Or if you asked me, (who does?) I'd at least say since this slump had to do with a debt crisis, let's see some debt forgiveness and for an old-fashioned kind of money-in-people's pockets scheme--pay raises. Up the minimum wage. Bills get paid and more money goes around.
*I don't even know where that Russ Meyer econowonk tattoo display came from. Of course I don't.