This is the best article on Keynesian economics I have ever come across, by David Weinberg and published in The Federalist: Why Economic ‘Stimulus’ Only Makes The Economy Worse. His summary statement captures his point perfectly:
While it remains a favorite policy prescription for politicians eager to appear as salvific heroes in times of need, it is untenable as a serious idea to stimulate anything except our national debt.
I could not recommend any article more. You should read it all, every word. There is a lot in it, but this was my favourite part:
The reality is that Keynesian policy fails for the simple reason that it targets the wrong problem. Production drives economic growth and creates an equal flow of demand. Demand is thus the consequence of production, not the other way around.
Successfully growing an economy, then, requires targeting production, not aggregate demand. Indeed, trying to grow the economy by targeting demand rather than production is like trying to grow a flower by watering its petals instead of its roots.
Here’s how his article relates to current policy.
In light of these numerous historical blunders, it is a wonder anyone takes Keynesian fiscal policy seriously anymore. Yet policymakers and politicians remain wedded to the model, as the current fury to rush through spending packages attests.
Now, lest the message here be misconstrued, this is not necessarily an argument against relief as a humanitarian measure in the midst of an economic meltdown resulting from governments around the world forcing businesses, communities, cities, states, and even entire countries to close down. This is a government-created economic disruption to deal with a public health concern.
Under these unique circumstances, there is certainly a case for providing targeted assistance. But we must not be fooled into believing that relief serves as economic “stimulus,” and nor can we ignore the fact that, beyond humanitarianism, there is no shortage of advocates calling for plain old demand-side fiscal stimulus. In that regard, there is little doubt that any Keynesian bill will blunt its drill on the same hard economic truth that stymied past demand-side exercises.
I can only hope the message spreads wider and deeper. It ought by now be obvious given the universal failures of public sector spending in the past.