Benn Steil is golden on the intellectual shortcomings of Keynesianism. The whole thing is worth reading, of course, but in the event that you want a passage summing things up, here it is:
. . . what should we do or not do today to get ourselves onto a sustainable path out of recession?
Well, there are two brands of remedy. The first are government measures intended to eliminate obstacles to the adaptation of supply to changing demand. This is the now much-maligned classical brand of remedy. The second are fiscal and other government measures designed to force demand to adapt to supply. This is the Keynesian brand of remedy, now beloved in Washington, based on the belief that under-employment is a congenital defect of the economic system.
Each huge dose of this second remedy serves to further obliterate the functioning of the price mechanism, thus necessitating another huge dose. In the long run, this almost certainly means crippling debt, inflation or both. But Keynes, of course, advised against thinking too much about the long run.
The Obama Administration has, of course, taken Keynes’s advice. When it comes to our fiscal future, no planning whatsoever is taking place.