It's Official: Keynes Was Right

Henry Blodget says IT'S OFFICIAL: Keynes Was Right. I find it a reasonable way to convince someone.

"Basically, austerity puts you into a death spiral in which you keep trying to cut your way to prosperity, but all you end up doing is digging a bigger hole. And in the meantime, tens of millions of people are out of work, the economy is retrenching, and everything is generally miserable."

"And by 2007, they had put us in one hell of a hole. And, given that, it seems reasonable to think that, as Krugman has long argued, one of the problems with the economy now is that the original stimulus just wasn't big enough. And it also seems reasonable to conclude that, given the mess we got ourselves into, there is just no quick fix, regardless of what anyone does."

"The Austerians love to point at the 1930s as "proof" that Keynes was wrong. Look at the huge "New Deal," they say. Look at all those expensive public works projects. Look at all the spending the government did to try to get us out of the Great Depression, and it never really worked. What got us out of the Depression, the Austerians smugly observe, was World War 2. But what was World War 2 if not an absolutely gigantic Keynesian stimulus? The Federal deficit in World War 2 was massive—much bigger than any time during the Great Depression. And we built up a huge Federal debt load. And ... we set the stage for two decades of amazing prosperity, in which we worked off those debts."

Exactly.

"Meanwhile, given that we've already racked up $15 trillion of debt, I certainly wouldn't be opposed to our spending another couple of trillion upgrading our piss-poor infrastructure. Incurring debt to build things that help all Americans, from unemployed folks to business leaders to children, is a trade-off I'm willing to make. Especially if the jobs created by this "stimulus" spending help alleviate our massive unemployment and inequality problems."