To all those attending John Stewart’s rally in front of the Lincoln Memorial last week, who were asked if they thought the President was a Keynesian and answered that no, he was born in the United States, this election was about you.
There were other issues of course, with health care reform at the very top of the list. But at the end of the day, the palpable damage to the American economy of the “stimulus” package has been the core problem. Had the US entered recovery after a short sharp recession, there may have been lost seats here and there but not the rout we have seen. But with the American economy floundering, having no momentum and unemployment at deep recession levels with no sign of a return to more prosperous times, this was the result.
There is no question that the Republican majority in the House and its increased numbers in the Senate will be doing what they can to bring the deficit down and limit, as much as possible, the growth in the level of debt. This is the practical side of economics. The theory that says cut spending when unemployment is high is not found in 99% of your standard macroeconomic texts. But this is what will now happen. The walking back of so many of these unproductive stimulus expenditures will create a level of pain but if they manage to grasp the nettle of restraint, recovery will come.