Once upon a time, President Obama was a traditional Keynesian. When he came into office, he favored a massive injection of new government spending into the economy in the name of “stimulus” — counter-cyclical federal activity aimed at offsetting depressed consumer demand emanating from a recession-battered private sector.
Unfortunately for the president, that approach to economic revival has now been thoroughly discredited in the public’s mind. The problem with Keynesianism isn’t the theory; it’s the practice. What happens in the real world — that is, the world in which Congress drafts and passes legislation — isn’t a series of tidy, one-time, highly valuable public investments that would not have occurred were it not for the legislation.
No, when Congress writes stimulus spending bills, what we get are narrow-purpose pet projects, large federal bureaucracies, ideological hobbyhorses, and spending that simply displaces what otherwise would have occurred anyway, especially at the state level. The net result provides little if any boost to aggregate demand because the states — and to some extent private citizens — simply pocket the federal money and reduce their deficits and debts. Meanwhile, what federal taxpayers get is a permanent increase in the size of government — because almost nothing in politics is ever “one-time” — as well as a massive increase in the national debt.
Of course, it didn’t help that the president and his advisers claimed that the $800 billion stimulus bill that Congress passed in early 2009 would keep the unemployment rate below 8 percent. Because unemployment soared past 8 percent in early 2009, and even now, more than three years after passage of the stimulus bill, it still has not fallen back below that level even once.
So the president has abandoned any pretense of defending the signature economic initiative of his term in office. Indeed, like his health-care plan, the stimulus is something he pretty much never mentions. That has put him in a difficult position, because the economy continues to be the top concern of voters, with just six months to go to the November election.
To fill the void, the president has taken to articulating a different kind of economic “philosophy” in a series of high-profile speeches over the last year. It began with his denunciation of House Budget Committee chairman Paul Ryan’s 2011 budget plan last April, and continued with his address to a joint session of Congress last September, his speech in Osawatomie, Kan., in December, and the sequel to his Ryan-denouncing tirade delivered earlier this month, now known with special fondness as the “social Darwinism” speech.
From these speeches, we learn that the president believes that the way to confront the central challenge of our time and restore an era of robust economic growth in the United States in the years ahead is . . . what exactly?