The new old deal

You simply can’t tell the public on the one hand that there is an imminent danger of economic meltdown if your plans are not implemented – and on the other, give the impression that those plans are little more than scribbles on the back of an envelope. Obama is much more able to get away with such a mismatch between promise and practice – he has a fresh mandate and the high level of opinion poll support which tends to attach to that. Yet, for the same reason, he will never have had a better opportunity to harness popular goodwill to political action…

In other words, Obama is backing the most primitive interpretation of Keynes’s theories: that any form of government spending amounts to an economic stimulus. He is almost blind to supply-side economics, which suggests that if you want to encourage profitable job creation, you should concentrate on reducing companies’ payroll taxes – and then leave individual businesses to decide how best to employ the funds released.