It’s been proven time and again that FDR’s New Deal actually worsened the Great Depression. Keynesian economics just don’t work, not matter what trollish hacks like Paul Krugman preach.
Now a study from Harvard Business School shocks its very authors, who are surprised to find that increased government spending results in increased unemployment.
Recent eesearch at Harvard Business School began with the premise that as a state’s congressional delegation grew in stature and power in Washington, D.C., local businesses would benefit from the increased federal spending sure to come their way.
It turned out quite the opposite. In fact, professors Lauren Cohen, Joshua Coval, and Christopher Malloy discovered to their surprise that companies experienced lower sales and retrenched by cutting payroll, R&D, and other expenses. Indeed, in the years that followed a congressman’s ascendancy to the chairmanship of a powerful committee, the average firm in his state cut back capital expenditures by roughly 15 percent, according to their working paper, “Do Powerful Politicians Cause Corporate Downsizing?”
“It was an enormous surprise, at least to us, to learn that the average firm in the chairman’s state did not benefit at all from the unanticipated increase in spending,” Coval reports.
So, you wonder why unemployment is so high and this recession has lasted twice as long as normal recessions?