Last week I noted the revival of interest in F.A. Hayek’s classic political tract, The Road to Serfdom. This week? The ongoing revival of interest in Hayek’s theory of boom and bust.

According to economist Gerald P. O’Driscoll, Jr., today’s debate about stimulus spending mirrors the debate in the Great Depression between John Maynard Keynes and Hayek. Republished letters from October, 1932, Times of London, are eerily up-to-date.

The letter from Keynes and his allies, arguing that spending — any spending whatsoever — would spring the economy out of depression strikes me as a tad bizarre. All spending is equal? Make that several tads bizarre.

Can you say déjà vu?

The Hayekian response seems at once more sophisticated as well as commonsensical. For instance, Hayek recommended an immediate repeal of the infamous Smoot-Hawley Tariff. He recognized a major factor for the Depression’s low expectations and business doldrums: The trade-killing legislation that hit the New York Times’s front page the day before Black Tuesday, 1929.

O’Driscoll and other economists have been making much of the enduring significance of the Hayek-Keynes debate. But there are differences between the Depression and now, aren’t there?

Back then, the loss part of the profit-and-loss system hadn’t been so completely undermined by recovery policy. Today we have bailouts, and these only increase risk-taking, likely to make the next bust even bigger — and today’s Keynesianism perhaps worse than the disease itself.

This is Common Sense. I’m Paul Jacob.

Senator Bob Casey from Pennsylvania is legislating something big, the “Create Jobs and Save Benefits Act.”

Innocuous? Everyone wants more jobs. Government may have a lousy track record creating jobs that actually produce things demanded by people, but still — the bill is hardly unexpected in times like these.

It’s the second half of the title that indicates the powder keg within. The bill would bail out horrendously mismanaged union pension plans.

Unions, in the current legal context, are legal creatures of the state, with special privileges. And, surprise surprise, their own pensions — the ones that they manage — appear to be in as bad shape as the public-employee pensions I’ve talked about before, the ones that are building into a tsunami of insolvency.

A public bailout would transfer money from people without any special pension plan to people with pensions that are going bust. This is horribly unjust. That’s why Americans for Limited Government — a past sponsor of this program — is calling out Republican politicians who’ve signed onto Casey’s audacious scheme.

“At issue are multi-employer pension plans, in which companies across an industry pay into a single pension pool,” explains the Wall Street Journal. “[E]ven before 2006 only about 6% of multi-employer plans were fully funded, compared to about 31% of single-employer plans. The real problem is that multi-employer plans have become a sort of pension Ponzi scheme.”

Hmmm. Where have we heard that before?

This is Common Sense. I’m Paul Jacob.

The European Union is bailing out Greece. Fearing financial contagion, EU’s policy wizards decided to throw 100 billion euros at Greece, in tandem with demands for austerity.

New spending restrictions are tough enough to elicit the verdict of “savage” from Greece’s public employee unions. But are they “savage” enough?

The euros-to-the-rescue scheme occurred only after collapses of Portuguese and Spanish bonds. As mentioned last Friday, things aren’t good on Europe’s other southern peninsulas, either.

The “Domino Theory” remains a dominant metaphor. Once, we feared countries would fall like dominos to communism. Now, it’s like dominos into insolvency.

But propping up a tipped domino isn’t easy.

Drastic solutions, like expelling the duplicitous Greek nation-state from the EU? Not on the table. The apparent aim of the bailouts? Keep as many of the major players responsible for the fiasco in as good a shape as possible.

If, on the other hand, every politician were fired and every contract with unsustainable giveaways to public employee unions were dissolved as part of bankruptcy, might future policy makers be a little more cautious?

Meanwhile, the dominos keep falling. The day after announcing the bailout, the euro plummeted.

My question: What happens when “too big to fail” is applied not to a tiny country like Greece, but to the good ol’ US of A?

What if we’re too big to bail out?

This is Common Sense. I’m Paul Jacob.

If there’s anything worse than running a state into the ground, it’s turning that state around.

Such seems to be the attitude behind yet another “bailout” program being mulled over by our congressional overlords in Washington, DC.

Over at National Review Online, Daniel Foster calls the Democrats’ proposed $23 billion fund for preventing teacher layoffs a “putting off hard decisions” fund. Pitched in the direction of Foster’s own state, New Jersey, the giveaways would sabotage efforts by the new governor, Chris Christie, to close a looming budget deficit for fiscal year 2011 of more than $10 billion.

The Garden State’s budget for fiscal year 2010 was about $30 billion. Christie is trying to cut funding to school districts. He has pledged to restore the funds in districts where teachers agree to a one-year pay freeze and to contribute a small bit of their salary (1.5 percent) to help pay for their own health insurance. Currently, most pay nothing.

But if the federal government flings borrowed largesse that makes the state’s budget cuts irrelevant, teachers will have much less incentive to cooperate with even marginally more responsible policies.

Perhaps that’s the goal for Washington’s big spenders. After all, if folks could get their fiscal houses in order without handouts from the spendaholics in DC, there’d be no need for such handouts.

And then just how “important” would those politicians be?

This is Common Sense. I’m Paul Jacob.

The president says he’s creating jobs. I’m skeptical. I guess there are some things government can do to ensure that jobs get created, out there in the bill-paying, profit-making world. But these do not include spending trillions of borrowed money.

And neither do they include simply giving more money to state and local governments.

The truth about Obama’s much-ballyhooed job creation is that more than half of his alleged new jobs turn out to be government jobs.

Government jobs don’t count, Mr. President.

Remember, many things governments do actually drain us. Jobs in the marketplace, on the other hand, serve real consumer demand, make us all better off. They also help pay the taxes for those government jobs. Employing more people in government means needing more real jobs to pay for the government ones.

And how much work do politicians cause us to engage in just to unbury ourselves from their silly, wealth-extracting regulations? I know, I know: Every time they add on some new complication to the tax code, jobs emerge in the accounting and tax-consulting industry. But this doesn’t exactly make us better off, does it? Not on net.

This lesson applies generally. Here’s the bottom line. Government can borrow and tax to spend to create “gross jobs.” Sure. But on net, after balancing the collective books, we’re not better off.

This is Common Sense. I’m Paul Jacob.