What is the American Model Really About? Soft Budgets and the Keynesian Devolution

James K. Galbraith

Economics Public Policy Brief Archive from Levy Economics Institute, The

Abstract: The "American Model" serves as a point of reference in discussions of economic policy around the world especially in Europe; many claim that the American version of the free market represents an ideal type-it is the highest form of capitalism. The author argues, however, that the United States has relied heavily on government intervention in housing, health care, pensions, and education. Not only have these programs been largely successful and popular, they also provide a Keynesian stimulus to spending that help account for the strength of the U.S. economy. Now that the U.S. is in a weak, jobless recovery, the key to restoring growth may lie in the kinds of governmental programs that have helped to sustain and stabilize the U.S. economy in the past.

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