“A central fallacy of Keynesianism, as of all inflationary nostrums, is that they chronically confuse ‘income’ in terms of paper money with real income in goods and services. It is possible to increase paper-money income to any amount by debasing the currency. But real income can only be increased by working harder or more efficiently, saving more, investing more, and producing more.”

— Henry Hazlitt, “Man vs. the Welfare State”

Nobel Prize-winning economist, Princeton professor and New York Times columnist Paul Krugman, whose pieces appear from time to time on these pages, is one of the more erudite if less persuasive defenders of the theory that government “stimulus” will put a weak economy back on the path to robust growth and full employment.

Krugman’s criticism of the $800 billion stimulus enacted in President Obama’s first year in office is that it was not too large, but far too small.

It makes one wonder what kind of necromancy is taught in graduate school economics these days.

Keynesianism as economic theory has two parts, only one of which in practice is ever fully engaged. The part that is, increased government spending, is meant to fill in the depressed valleys of the classic business cycle, which is presumed to mimic the curve of a sine wave, which it seldom does. The part that is rarely put to work is a dialing back of government spending to knock off the peaks of the cycle to prevent the economy from overheating.

What Keynes envisioned was an essential flattening of the cycle, thus enabling private business to more rationally plan and invest, and government to step back from intervention in the marketplace.

Politically, this has not proven feasible. In Washington, the urge to spend and spend almost always overwhelms that to cut and cut.

What Keynesianism actually has brought about is a steady rise in hidden, and sporadic spiking in more recognizable inflation. This has occurred over a period of many years, in good economic times and bad, under both conservative and liberal governments.

Economics and politics make strange bedfellows. What such cohabitation often conceives and gives birth to are inordinate growth of government, erosion of personal liberty and, far from the upward leveling of wealth consistently promised, a leveling down of that earned by the middle and lower working classes.

Since the onset of the Great Recession in 2008 the working classes in particular have been hammered. Wages in constant dollars have eroded, along with the standard of living enjoyed by many working Americans.

Paradoxically, Keynesianism also has led to a greater concentration of wealth in fewer and fewer hands. We likely have more billionaires, and certainly more people living in poverty, than before President Barack Obama was first elected. He has added $7 trillion to an already staggering public debt, substantially increased taxes on investment income (dividends and capital gains), and enacted a new and hugely expensive entitlement program (Obamacare).

It’s not that he hasn’t tried to get the economy moving, it’s just that his policies have not worked very well.

All the blame should not be put on him. He’s had a lot of help from similarly minded Democrats in Congress and more particularly from the Great Enabler himself, Federal Reserve Chairman Ben Bernanke. Without the Fed’s near-zero interest rates and its “quantitative easing” — its monthly purchase of $85 billion of Treasury Debt — it’s inconceivable that the runaway spending this administration and this Congress have engaged in could have avoided the onset of ruinous inflation.

It’s interesting to consider that so little has been written or said about who the Fed’s policies have helped and who they have hurt. They have certainly helped the government pay interest on the national debt, and banks to reconstitute their balance sheets by stiffing customers.

Have you noticed how little you earn (about a quarter of one percent) on your savings deposits?

But hey, the stock market’s doing gangbusters, isn’t it?

And China’s still buying our Treasuries ...

R.L. Schreadley is a former Post and Courier executive editor.