Austerity measures in Europe have been the topic of a heated and mostly confused debate in the economic world. During the May summit of the leading industrial nations at Camp David, German chancellor Angela Merkel and other European leaders pushed for continued European austerity. Keynesian critics argue that these policies destroy economic growth.

The economies of Great Britain and Germany are growing after those nations' governments announced plans to reduce spending, an example that the United States would be well-advised to follow.

The history of the homebuyer tax credit shows that the housing stimulus package was ineffective, added billions of dollars to an already bloated deficit, and wasted tax dollars.

Recent bad news in unemployment confirmed that the biggest Keynesian stimulus in U.S. history was a bust, and as policymakers considers how to now stimulate the economy, reduced tax rates are the best alternative.

The US economy continues to disappoint and performs more poorly than original forecasts that were made by the more optimistic economists, who also tended to be supporters of the idea that our economy needs a big Keynesian stimulus. Sadly, this does not come as a surprise to many.

With the economy once again teetering on the edge of recession, policymakers will inevitably propose another round of stimulus spending. You can bet on it--just as you can bet that any such spending won't help the economy.

Nobel winners Sargent and Sims taught us to set aside our old, nice, simple economic models. We need to heed that lesson today.

Why did Obama's first jobs plan--the $825 billion stimulus--so quickly result in the need for another jobs plan? The economy would have benefitted far more if the government had instead improved the incentives for people and businesses to invest, produce and grow. The President probably won't mention any of this, but it does explain why he has to give his latest speech.