Every time we engage in debate about this policy or that, someone will come up with a particular catastrophe that "proves" a good idea was a failure, or a period of growth that "proves" a bad idea worked. For example, the left often points to the housing bubble and the subprime crisis as "proof" that Bush's tax cuts were a flop, or they will point to the growth oft he 90's as proof that Clinton's policies were successful.

However, the whole argument is a bit spurious, for two reason. One which applies to all economic arguments and one which applies specifically to our time and place.

First, the general argument. The economy is not static, it is not a lab experiment. We cannot say "ceteris paribus" (all things remaining equal) with a straight face. While Bush was making tax cuts, for example, Freddie and Fannie were subsidizing bad loans, the congress was over spending, the Federal Reserve was changing the prime rate, and, in the background, millions of businesses were going about their daily affairs. Any one of those things could have changed the economy enough to cause the problems we saw, even if the tax cuts were beneficial. On the other hand, the tax cuts could have been useless, and other events could have improved the economy making it seem the tax cuts worked. (I mentioned this earlier concerning Clinton's tax increases and inflation.)

Second, and more importantly, our economy has been critically ill since 1934.  Don't get it me wrong, it had problems before that. The birth of federal regulation in the 1890's with the antitrust laws, the massive ballooning of regulatory agencies in the teens, the creation of the Federal Reserve, and the beginnings of the New Deal. But in 1934 the real death blow came, the severing of ties with gold. Yes, dollars could still be redeemed for gold by foreign individuals and banks, but that was a small enough check that in effect the government could inflate as much as they wanted. 

Why is the ability to inflate the death knell of the economy? For many reasons, and not just the obvious harms of inflation, though I will deal with those next. No, the first harm of unchecked inflation is that it allows unchecked spending. When the government had to sell bonds only to the private sector it was limited in how much it could spend. Maybe during a war or crisis citizens would be more forgiving, but by and large, the government could only issue a certain number of bonds, and the more bonds outstanding, the fewer additional bonds it could issue. This acted as a check on government spending.

Once spending is no longer checked,t here is nothing to keep the government form expanding into every area of life. With no limits to spending, there is no limit to government. So long as the citizens will accept the expansion of power, the government can afford it. And since they can spend as much as they want on convincing the people to allow it, there is effectively no limit to government. It is not just spending other people's money any longer, it is spending monopoly money. The government can expand at will.

And because the government can expand at will, the economy shows many distortions we would not see otherwise. In a limited government, where every dime the state spends must be borrowed form somewhere, a cut to government results in an increase elsewhere. However, once we involve the government in everything, paying for its involvement with magically created money, cutting government suddenly causes a net loss in spending. In other words, it no longer is a zero sum game.

Of course, that is not to say government spending is good in such a situation. Though the government is magically creating money, it is still using it to buy real goods, with the end result that it is inflating the money supply, causing the value of existing money to decrease. In effect, stealing from those who already hold money. And that is where the real distortions come in.

Inflation, by its nature, causes distortions in the market, bad investments, excessive dividends, economically unsound loans, and so on. And that makes it hard to judge the real impact of policy changes. because the market has been distorted by inflation since at least 1934, any policy can have quite unpredictable outcomes. When the economy as a whole is acting based upon distorted signals, it is hard to judge whether a policy succeeded or not.

Of course there is a simple way to avoid all these problems, accepting that economics is a science. Once we accept that there are regular economic phenomena, we no longer need to ask "does it work in practice", we can point to the theoretical models and show that it will or will not work. Of course these models eventually need to be tested against the real world, but I think many models have already shown a pretty good ability to predict outcomes. (And no, they are not the Keynesian models the government loves so much.)

Of course, the pragmatists will argue that economics is not a "science" and we should just "do what works", but I think reality has shown that approach is prone to get us into even more trouble, not less.