The Destabilizing Stabilizers: Why Increasing Government Spending Prolongs a Recession
Keynesian theory says that the way to end a recession in which the economy is in a “liquidity trap” is for government to ramp up spending. Murray Rothbard demonstrated that this policy actually blocks an economic recovery.
Source: Mises Institute
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DW NOTE
The Mises Institute has published the same Austrian critique for 75 years: government spending during recessions delays recovery by freezing malinvestment in place. They are correct. But writing it in August 2026, when the federal deficit is running at $1.9 trillion (6% of GDP) and the Fed has held rates flat at 3.65% through a supply shock that closed Hormuz, is less a theoretical argument than a description of policy already in motion.