It took a long time for this man's ghost to be killed with a wooden spike. I'm talking about John Maynard Keynes.
Keynes has become the leading model for gross economic planning. He has reigned supreme for more than 70 years. I read his General Theory when I was in college economics and was unable to find anything other than socialist clap-trap. There was a hint in the appendix of a different model. But in fact it was Keynes’ direct personal advice to England that became the theology of Keynesian economics. Keynesianism claims that in order to increase consumer demand in periods of negative GDP, the government must increase its deficit.
This has been American policy as well as that of almost every other advanced nation in the world since WWII.
Thanks to the Democratic party we had an experiment that clearly contradicts Keynesian doctrine. Japan, of course, clearly proved Keynesian doctrine wrong earlier when the Japanese increased their deficit, for two decades, to the point where it was twice as great as their GDP. Japan never had respectable economic growth during that 20 year period.
The Democratic Congress in 2009, in response to a financially generated recession passed nearly $1 trillion in government spending and the associated deficit. We now have a careful study of what happened after the Republican Congress of 2011 applied serious restraints to the government deficit.
Once the restraints on the deficit were in place the economy of the United States began to grow at a rate far faster than it did during the Keynesian preceding three years. A great test and proof that Keynesianism doesn’t work.
Putting the stake in the heart of the Keynesian ghost was again the act of a Republican Congress that refused to extend unemployment compensation beyond the three years it had already been extended. The consequence was that we had many different states with different lengths of time for unemployment compensation.
In many cases we had counties on different sides of a state line as perfect control tests of the effect of having unemployed workers without unemployment payments. The marvelous study of that data shows that when you reduce or stop unemployment payments employment goes up. People get off their asses and seek work.
At least among economists, young ones will now have overwhelming evidence that Keynes’ theories don't work.