Amity Shlaes, author of the terrific The Forgotten Man, a new history of the Great Depression, responds to criticism from Paul Krugman.
Dr Krugman makes a second charge, that I misrepresent John Maynard Keynes by associating Lyndon Johnson’s Great Society with Keynes when the Great Society was a social and not an economic program. In 1964 Johnson pledged to build a Great Society with an emphasis on social improvement in his Great Society speech, just as Dr Krugman said. My point was that the political engine of the 1960s treated any spending, including Great Society spending, as a stimulus. Keynesianism defined the very lexicon of policy – that is why Milton Friedman said “we are all Keynesians now.” TIME even gave Keynes a cover: “The Keynesian Influence on the Expansionist Economy,” read the banner in the corner. Keynesianism was crucial window dressing for the Great Society show. Spending on all sides became permissible, and that only made sense if you cared less about deficits and more about growth – Keynesianism. Thus in July 1965, after many pieces of new legislation, The New York Times was writing headlines such as: “Johnson Policy Will seek to Prolong Boom: Administration Commits Itself to Spur Economy by Tax Cut or New Spending…” The same story has Johnson saying his new budget would “include sharp increases in spending from programs enacted during the past few years.”
