Let's examine the standard economic narrative

As we watch the economy continue in recession--perhaps even veering into a "double dip" recession or depression--perhaps it's about time we examine the standard economic narrative for the past 80 years or so; that somehow the government can generate economic results that will pull the nation out of recession.  Of course, anyone familiar with the real history of the Depression--unemployment never went below 15% until the Wehrmacht was marching into Poland, generating ammunition, food and fuel orders from France and England--would have to dispute this narrative simply out of evidence. 

For that matter, anyone watching the largest stimulus spendumore program in history completely failing to generate hiring would also have to start doubting the usual Keynesian theories--which are modified, but not eliminated, in the monetarist/supply side interpretations of the Reaganites.

So let's consider this; the magic I learned about in intro to macroeconomics is a quadrangle where somehow, a bump in spending would magically transform into four, or even ten, times the economic output as the spending.  I remember listening, almost in rapture, to the presentation.

Unfortunately, I violated a basic premise of logic; I failed to consider the question of "well, if it works so well, why haven't we figured out how to eliminate recessions?"  This is pretty egregious on my part, as I'd grown up with the kids of laid off steelworkers who knew quite well that nobody had done that for my part of the world.  I should have known better.

And so it's time to ask the question; is it really true that the economy is helped more when the Air Force buys a $600 hammer than it is when twenty carpenters buy a $30 Estwing?   Is the economy helped more by an additional. $1000 in welfare checks transfer payments, or when an employer has an extra grand to hire a new employee?

On one level, the results should be equal; the money spent on whatever purpose by whatever entity goes into consumer spending, savings, and so on equally.  On another, however, we should anticipate that government largesse ought to be harmful; when we choose to devote $1000 to transfer payments instead of to hiring in the private sector, we've simultaneously chosen that a certain amount of productivity will be lost.  In real (as opposed to government accounting) terms, the economy is smaller as a result.

Looks like it's time to walk away from John Maynard and towards Ludwig, listening to the lessons that our grandparents learned during the Depression.  Government "help" is, as Washington and Reagan both noted, an extremely dangerous, and often counterproductive, thing.