Here's a quick, hopefully thought-provoking post.
Under Pres. Reagan there was a large expansion in the size of the federal government. Who had control of Congress during those years? Democrats. Pres. Clinton gets credit for having a good economy and balancing the budget but who is responsible for making and passing budgets? Congress. Pres. Clinton did the politically expedient thing and worked with the Republicans in Congress to get the budget balanced (although, the budget would prove to be unsustainable because it was based on unrealistic expectations of future tax income; the balanced budget was in trouble starting in late 2000 and early 2001 when a recession hit).
We had a good economy in the 1990s with Republicans in charge of Congress and with a Democrat in the White House. Things went south with the Internet bubble burst in 2000 and 2001. That was the start of a recession made much worse by the events of 9/11. Thankfully, the "Bush" tax cuts (Republicans were still in control of Congress) were passed. They helped shorten the recession. What was not good was passing them and increasing our federal spending. The economy was going along quite well until the housing market crashed in 2006-2007. This was one of the main factors resulting in the biggest recession the U.S. has faced. I'm not going to blame any political party for the recession but I have to point out that Democrats (and many Republicans) helped put in place government housing policies in the 1990s that were factors in the housing bubble burst. Further, Democrats were the ones opposed to regulations Republicans were trying to put in place that might have reduced the housing market crisis. Both parties are culpable for their actions or inactions though.
In 2006 (2007) Democrats took control of the House and Senate. In 2007 the recession officially started. Things were bad with the Republican Pres. Bush and a Democrat majority in Congress. They passed some bailout policies that were weakly effective at best and harmful at worst. Then Pres. Obama took office in 2009 (2008 election). He nearly had a Democrat supermajority in Congress with which to work. It seemed the perfect time to get things done to help the economy but instead of focusing on the economy, or at least trying to stay out of its way (there were other bailouts, some that seemed effective - the auto bailouts - but most have no measurable effects other than a huge deficit), Pres. Obama and the Democrats passed an environmental bill (which no one had the opportunity to read before it was passed) and a gigantic health insurance bill (which also was not read before it was passed).
In 2010, after about 2 years in office, Pres. Obama said he was serious now about the economy. Things were still bad. In 2010 (starting tenures in 2011), Republicans took control of the House and gained seats in the Senate. In 2011 the economy finally started to improve after Democrats no longer had complete control of Congress. It's still rough but getting better.
What I think is interesting is that the economy seems to flourish when Republicans are in charge of Congress and it seems to flounder when Democrats are in charge of Congress. It also seems that our economy is finally starting to recover in spite of the worst efforts of many Democrats (and many Republicans who either went along or didn't fight bills enough). It seems like the best course of action would have been either to do nothing or pass smaller, more focused stimulus measures. Tax cuts always work to improve the economy and are usually the best way to stimulate the economy. They just have to be accompanied by a reduction in spending. Basically, the government should get out of the way of the economy and provide focused regulations when necessary.
This post is biased. I wrote it this way on purpose to provide a counter-point to many arguments I have heard or read that praise Pres. Clinton for the good economy of the late 1990s, blame Pres. Bush for the 2007 recession, and praise Pres. Obama for the current economic improvements. There are many people who blame all good things on actions of Democrats and all bad things on actions of Republicans. That's such a gross oversimplification of who things actually work that it's not an effective argument (well, it is often effective because many people do not think critically and just accept it as truth). I wrote this post to show that I can argue just the opposite - that poor economies are the result of the actions of Democrats; after all, Congress is in charge of spending and passing laws and our economy suffered the most with Democrats in charge.
What's the truth? Probably something in the middle (Democrats and Republicans are both responsible). Our federal government is too big and certainly too inefficient. I'd argue that the inefficiency (bureaucracy) is worse than the size of government. We need a Congress and a president who are willing and able to increase the efficiency of the government in part by reducing its footprint.
Once again, Mitt Romney, a successful businessman and former governor of Massachusetts, offers his insightful advice about how to best stimulate the economy. His theory toward economic policies is much more Smithian than Keynesian. His tagline is Stimulate the Economy, Not the Government.
Quoting the CNN article: "In the final analysis, we know that only the private sector -- entrepreneurs and businesses large and small -- can create the millions of jobs our country needs. The invisible hand of the market always moves faster and better than the heavy hand of government" (emphasis added).
Lastly, in a letter to supporters he stated, "This is a time of hardship and uncertainty for millions of Americans. Unfortunately, the new President and the Democratic Congressional majority seem more concerned with stimulating the government than stimulating the economy."
We need to stimulate the economy by freeing up more money from the clutches of our inefficient government. Our government needs to gain inspiration from Smith and Friedman (as far as arguing for smaller government), not Eva Perón's welfare program or her husband Juan's economic policies that led to the downfall of the Argentinian economy (please read the comments to this post for more about Argentinian economics).