Goodbye Keynes, Hello Hoover
The first fundamental failure of Keynesian economics occurred forty years ago during the Vietnam War when the economy was overheating but the political system failed to take the corrective steps that would restrain price inflation—that is, raise taxes and reduce federal spending. The decade of economic stagnation that followed became a central factor in discrediting both liberalism and the Democratic Party.
Wrong. Despite popular mythology, Keynesian economics actually first failed during Keynes' own lifetime, back in the Great Depression. More accurately, the rather selectively-interpreted and extremely cherry-picked tactics scalpeled out of Keynes' theoretical work failed, in large part because of that selective interpretation and cherry-picking. And among the first to say so was Keynes himself, who noted that his prescription was for short-term ameliorative action, not long-term doctrine. But I digress...back to Greider:
We are now witnessing a second great failure of the doctrine John Maynard Keynes devised for managing a healthy economy. This time, Washington faces the opposite problem—a starkly underperforming economy in which 10 percent of the workforce are without jobs and income. Yet the President and Democratic Congress, spooked by the swollen federal deficits, are unwilling to do what Keynes prescribed in these circumstances—pump up federal spending enormously and run even larger budget deficits in order to force-feed a stronger recovery.
One can gain a solid grasp of Greider's own political stance simply by noting what he (along with most other liberals) leaves out of the classic Keynesian prescription for recession -- cutting taxes. Yet Greider and his ideological cohorts have no problem whatsoever remembering the "raise taxes" part of the Keynesian price inflation prescription.
Keynesian theory has many empirically demonstrable flaws and it's not my intent to begin a long dissection of them*. My point here is highlighting the willful selective ignorance of those socialist/statist ideologues who want more government and more more spending and (at root) more more MORE state control over individuals with the concomittant loss of freedom that implies, and use Keynes as their crutch. Even dedicated Keynesian Paul Krugman (who really is a brilliant economist when he's not being a complete political-media whore for "progressivism") has had some things to say about Greider's utter lack of critical-thinking skills, at least in the field of economics.
So when you hear ideologues tossing derogatory sneers at "Keynesianism" and "Monetarism" and "Libertarianism" and such, keep in mind that the overwhelming majority of them, like Greider, haven't got the intellectual foundation to know WTF they're talking about. Or even the ability to grasp that they don't have that foundation.
[*--For a much more balanced and empirical rather than ideological view of the current state of our economic situation and the failed applications of Keynesian theory thereto, N. Gregory Mankiw's recent article in National Affairs provides an excellent start for the intelligent layperson. Pay particular attention to his thoughts on the disparities between theoretical models and observed reality -- they have major applications in other areas, such as climate "science."]