Wednesday, February 11, 2009
There’s the Keynesian theory that $1 of Government spending will cascade down to more than $1 of economic activity. I’ve only seen that happen a couple time (1) The 1930’s Hydro-Electric dams and (2) the 1960s Interstate Highway system.
But converter boxes, NEA, Amtrak, nutrition programs, etc. are not likely to generate the returns that electric power and a highway system did.
At some point I think that Obama believes a version of the Keynesian theory where any Government dollar spent will magically result in more than $1 dollar of economic activity.
Spend money to make money is true sometimes. And sometimes it leads to Chapter 11. If Obama bet wrong, we’ll be like Japan in the 90’s. If he’s right, we’ll bounce back and grow enough to make the 7% of the GDP he played with insignificant.
Or it could be that our economy is big enough and fundamentally sound enough that we’ll bounce back as soon as we are done being afraid.
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