Audacity itself as economic experiment
President-elect Obama proposes an unparalleled test of Keynes’ decades-old idea: that deficit spending on a grand-enough scale can inspire the confidence to right a sinking economy.
In a measure of how quickly its options are shrinking, the United States is about to embrace an economic theory that was widely thought for most of the last generation to have been discredited: the idea that great bursts of deficit-funded government expenditure can jolt an economy back to growth.
And the nation is poised to put this theory to the test on a scale untried in peacetime by any developed country on Earth.
President-elect Barack Obama will soon unveil a package of tax cuts and spending increases that, combined with already planned spending, would push Washington’s 2009 deficit to between $1.5 trillion and $2 trillion — more than 10% of the economy’s output. And he will argue that this tidal wave of federal expenditure should continue into next year, and perhaps beyond.
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