In February of 2009, Congress passed and President Barack Obama
signed the American Recovery and Reinvestment Act. At the time
it carried an estimated price tag of $787 billion. Commonly
referred to as "the stimulus bill," it was intended to
reinvigorate an economy battered by the subprime mortgage
financial crisis. In September of this year, the president
proposed the American Jobs Act, which is also intended to
invigorate the economy and spur jobs creation. Under this act,
an additional $447 billion will be spent, leading some people to
refer to it as "Stimulus Jr." How exactly is increased
government spending supposed to stimulate the economy. The basis
for this prescription lies in a particular school of
macroeconomic thought known as Keynesianism. The name comes from
the famous British economist, John Maynard Keynes. When he came
up with his theories, Keynes had in mind an economy mired in
recession or depression, as was the case around the world during
the 1930s. In this environment, Keynes claimed that