When Donald Trump termed his tax and spending proposals “priming the pump,” we came full circle. Fifty-seven years after John Kennedy’s inauguration and 46 after Richard Nixon said, “I am now a Keynesian” a Republican president stated he was following the ideas of the long-dead British economist long associated with liberal economic policies.
True, Trump didn’t say “John Maynard Keynes.” But the term “pump priming” is as specific to Keynesian thought as “surplus value” is to Marxism. The idea is that deficit spending and looser money can get a stalled economy moving again.
It is a short-term policy that takes no account of longer-term incentives for savings and investment. It also assumes a degree of naiveté on the part of consumers and taxpayers. In other words, it represents everything the GOP ostensibly has opposed for 40 years and that was, at least temporarily, swept away by the “rational expectations revolution” within economics as an academic discipline.
Ironically, Trump said this just before the announcement that new claims for unemployment hit the lowest weekly level since 1988, when the population was 70 million lower. By most key economic indicators, the economy is expanding well, exactly the opposite of when fiscal stimulus would be called for.
History is instructive. Doctrinaire economics always opposed…