John Maynard Keynes, in his General Theory of Employment, Interest and Money, advocated deficit spending during economic downturns to maintain full employment. It is fair to say the theories of Keynes have been embraced by U.S. economic planners, and Presidents, for several decades – and each decade seems to have outdone the preceding one. But what sort of government deficit spending? During the 1930′s we built dams and power plants. During the 1950′s and 1960′s we built the interstate highway system and sent astronauts to the moon. During the 1980′s we invested in our military and won the cold war. These programs delivered a temporary stimulus to the economy, but they also yielded lasting benefits. The physical infrastructure, the strategic dividends, and the technological spinoffs outlasted the spending programs. There was a return on investment beyond the temporary stimulus – and this is the crucial difference between what we’ve done before, and what we’re doing now.
A good example of where deficit spending should go, but isn’t, is the F-22 Raptor, a fifth generation fighter that development began on over 20 years ago. Originally the F-22 was intended to replace the F-15, America’s current air-superiority fighter, and at least 750 of these advanced aircraft were supposed to be built. Today, with only 186 planes built, President Obama has canceled the F-22 program and their assembly lines are scheduled to be dismantled.
One would think the lessons learned during the Cold War – that deterrence depends on fielding an equal or [...] Read More