I’m referring to the proposal for another “economic stimulus” plan being floated by the Democrats — up to $300 billion in new spending on a vast array of pet projects. The Wall Street Journal discusses it here.
Simpleton Keynesian theory says that when the government spends more, that increases “aggregate demand” and thereby stimulates the economy. Unemployment goes down and people are happy again. Just what we need now, obviously.
Adults who bother to think about this notion easily see that there’s a problem. Additional goods and services don’t magically appear merely because the government spends money. Unless output increases, the government spending just cheapens the monetary unit. And if the things it spends money on draw resources away from productive enterprises, we get both inflation and falling production.
So this new “stimulus” package will only lead to rising prices unless the politicians come up with new “revenue enhancements.” That’s what Obama’s new taxes on “the rich” are meant for. But then, adults would ask, how does it stimulate the economy to take billions out of the pockets of people who provide most of the investment capital in the country?
I’m left wondering — Are the Obamacrats so hooked on childish Keynesian thinking that they really believe that the federal government can stimulate the economy? Or is the talk just political blather aimed at gullible voters?