Each recession, however minor, sends a shudder through politically sensitive legislators and administrators with their ever present fear that perhaps it is the harbinger of another 1929-33. They hasten to enact federal spending programs of one kind or another. Many of the programs do not in fact come into effect until after the recession has passed…The haste with which spending programs are approved is not matched by an equal haste to repeal them or to eliminate others when the recession is passed and expansion is under way. On the contrary, it is then argued that a “healthy” expansion must not be “jeopardized” by cuts in governmental expenditures. The chief harm done…is therefore not that it has failed to offset recessions, which it has, and not that it has introduced an inflationary bias into governmental policy, which it has done too, but that it has continuously fostered an expansion in the range of governmental activities at the federal level and prevented a reduction in the burden of federal taxes.
Does any of the above sound familiar? All I read from liberal blogs and Paul Krugman these days is how it would be a bad idea to stop “priming the pump,” cutting government stimulus and spending. To be sure, we can see from the above quote from Mr. Friedman, that this is not a new strategy and it most certainly is not one that has favorable long term results. Anybody want to bet that it will all turn out differently this time?