The Novel Voodoo

Scott Sumner sums up contemporary stimulus proposals well

...Old hydraulic Keynesianism from the 1960s was already a pretty implausible model. But what's happened since 2009 involves non but one, but at to the lowest degree 5 novel types of voodoo: 

1. The claim that artificial attempts to forcefulness reward higher volition boost employment, yesteryear boosting AD.

2. The claim that extended unemployment benefits---paying people non to work---will atomic number 82 to to a greater extent than employment, yesteryear boosting AD.

3. The claim that to a greater extent than authorities spending tin truly cut down the budget deficit, yesteryear boosting AD together with growth. Note that inwards the uncomplicated Keynesian model, fifty-fifty amongst no crowding out, monetary offset, etc., this is impossible.

4. More aggregate need volition atomic number 82 to higher productivity. In the onetime Keynesian model, to a greater extent than AD boosted increment yesteryear increasing employment, non productivity.

5. Fiscal stimulus tin boost AD when non at the cipher bound, because . . . ?

In all 5 cases at that spot is virtually no theoretical or empirical back upwards for the novel voodoo claims, together with lots of prove against. There were 5 attempts to force reward higher inwards the 1930s, together with all 5 failed to spur recovery. Job creation sped upwards when the extended UI benefits ended at the outset of 2014, opposite to the prediction of Keynesians. The austerity of 2013 failed to tiresome growth, opposite to the predictions of Keynesians. United Kingdom of Great Britain together with Northern Ireland had possibly the biggest budget deficits of whatever major economic scheme during the Great Recession, chore increment has been robust, together with withal productivity is similar a shot truly lower than inwards the quaternary quarter of 2007.