Note Keynes's concern. Government interventions, such as the cartelizing of industry through the National Recovery Administration, "will upset the confidence of the business world and weaken their existing motives to action." In other words, investors will not take the risks necessary for recovery if their profits and freedom are subject to unpredictable government action. Economic historian Roberts Higgs calls this phenomenon "regime uncertainty."
Keynes's letter apparently had little influence on Roosevelt, who stuck to his plan. In his second inaugural address a few years later, FDR feared that signs of recovery had jeopardized his reform plans by removing the sense of emergency: "To hold to progress today, however, is more difficult. Dulled conscience, irresponsibility and ruthless self-interest already reappear. Such symptoms of prosperity may become portents of disaster! Prosperity already tests the persistence of our progressive purpose." (Emphasis added.)
What a shame. Free people enjoying their lives make it harder for the administration to forcibly impose its utopian vision on them.
Obama wants to act quickly. In the name of stimulating the economy, he plans to spend hundreds of billions of dollars the government does not have to convert the economy from carbon-based fuels to "green" alternatives. Even if that were a good idea -- and it's definitely not -- it would not bring recovery. Any money the government spends must be taxed, borrowed or conjured out of thin air by the Federal Reserve, and that will reduce sound private investment. Obama has no real wealth to inject into the economy. He can only move around existing money while inflation robs us of purchasing power. Meanwhile, private investors who might have produced a better engine, battery, computer, cancer treatment or other wealth-creating and life-enhancing innovations hold back for fear that big government will undermine productive efforts.
The way to a lasting recovery is to greatly lighten the burdens of government. Then free Americans will save and invest.
Grand interventionist reforms go in precisely the wrong direction.