Obama and the Keynesian Revival

by Steven F. Hayward

There was a lot of chatter over the last few days about this Politico story suggesting Obama’s prospects might not be so hot, and as such he’s going to move slowly and cautiously on universal health care, carbon caps, and especially tax increases. This seems to miss the elephant in the room. More likely, Obama is hugely ambitious, and sees the economic crisis as a large opportunity to set the ground for the entire liberal agenda. The huge projected budget deficit becomes a feature, not a hindrance. In the Reagan years, remember, it was said that an unintended feature of the large budget deficits was that it put downward pressure on federal spending; there is some evidence this worked, though of course the record was mixed. Obama is going to be doing a reverse-Reagan: the huge budget deficits will put upward pressure on taxes. And as “stimulus” spending on infrastructure recedes, Obama will simply substitute health care, energy, and other items in its place.

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