At the same time increased government spending is merely government consumption, so scarce economic goods are allocated according to government dictate as opposed to their most highly valued and productive use. Therefore, we have no reason to believe that the state can either inflate or spend our society's way to prosperity.
We find this born out by the economic history of the last decade. If you think that government inflation and spending yields prosperity, surely Americans should be earning vastly more than they were a decade ago. That does not seem to be the case. Over the past decade, the Federal Reserve has overseen massive inflation. From 1999 through 2009, the money supply more than doubled, increasing 139%.
|Money Supply 1999-2009|
Government spending also more than doubled by increasing 107%. It expanded from $1.7 trillion to $3.5 trillion.
So what happened to median household income? It stayed flatter than a pancake (and a buttermilk one at that). In fact, it fell 5% (in constant 2009 dollars) from $52,388 in 1999 to $49,777 in 2009.
Median income moved the wrong way if inflation and government spending is the key to prosperity. The moral of the story is that if you more than double both the money supply and government spending, you do not double median income. Whatever you create, it is not economic progress.