Daydream Believers Confront Nightmare Reality That Mr. Stimulus, He Dead


As Tim Cavanaugh pointed out last night in a great post about stimulus rain-dancers, "The argument for Keynesian spending has been defeated in the court of your own two eyes. That will take some re-adjustment for believers." Perhaps slowing that re-adjustment process is the fact that the journalistic establishment often portrays Keynesian theory as an immutable law of nature, called into question only by the insane and corrupt. Take, for instance, this article in the Business section of today's New York Times, under the headline "Budget Cuts Raise Doubt on Course of Recovery." Here's how it begins:

The budget deal struck last week amounts to a bet by the Obama administration that the loss of $38 billion in federal spending will not be the straw that breaks the back of a fragile economic recovery.

Economic conditions can determine the outcome of elections, and growth remains tepid and tentative just 18 months before voters decide if the president gets a second term.

The proposed federal spending cuts, which were decided late Friday, do not amount to much by themselves, about 0.25 percent of annual domestic activity. But they join a growing list of minor problems impeding growth, economists said,

I'm actually surprised that the article goes on to acknowledge the existence of people who disagree with the notion that government spending boosts growth.

Read how "It Can Happen Here," three case studies of government cuts leading to growth in Canada, New Zealand, and these United States, from our November 3D issue on How to Slash Government. Then just start scrolling through the archive of our economics columnist, Veronique de Rugy.