Tom Kelly is the chairman of the Minnesota Free Market Institute. He is also a fellow at the Center of the American Experiment (CAE) and a partner in the Finance and Restructuring Department at Dorsey & Whitney. He wrote the following piece for CAE and we republish it with CAE’s gracious permission. You can read Mitch Pearlstein’s wonderful forward and Tom’s piece entitled Recessions and Recoveries: Lessons Not Learned here.  Tom has a wonderful, conversational style we think you will enjoy. He explains why Keynesian policies have been and continue to be a failure–and why politicians are so attracted to them despite those failures. And Tom offers five lessons in hopes that we can stop repeating the past:

Lesson One: The future belongs to the new.

Lesson Two: The “new’ comes from the private.

Lesson Three: Creation requires destruction.

Lesson Four: Recessions are a normal part of the economic cycle.

And Lesson Five: Government must let markets solve economic problems.

Here is a teaser to get you started:

“We are now three years into the financial crisis triggered by the bursting of the housing bubble, and more than two years into the resulting recession and lingering aftermath. It was the deepest recession we experienced in a generation—by some measures, the deepest since the Great Depression of the 1930s. In terms of economic policy, however, we have regressed to the early 1970s, before the last “great recession” of 1974-82, when Richard Nixon infamously said “we are all Keynesians now.” Today’s policy debate has been dominated by ideas that were tried, and found wanting, during the 1970s. The policy responses to date have consisted of two sets of actions. One is increased federal spending and “targeted” tax breaks, based on the theory of a “multiplier” effect that will result in each dollar spent and each dollar of tax relief being respent several times. The second is unnaturally low interest rates. This combination of policies failed to generate economic growth a generation ago but is being tried again on a far grander scale today. Why has this happened?”