[quote=livinincali][quote=SK in CV]
You’re closer to correct, but that’s not what I was responding to. He said spending to get out of debt. Keynes suggested just the opposite. There’s a big difference between getting out of debt and getting out of a recession. Keynesian ecomomics would lead to cutting spending, increasing taxes and deleveraging in times of economic growth.[/quote]
This is certainly true and another one of the primary excuses that is used to explain why the stimulus isn’t working as intended. If we admit that our government can’t follow this part of the Keynes economic theory why do we prescribe Keynes solutions to recessions.
Stimulus is politically popular and it does give the illusion of working over the short term, but when the government is deficit spending 1.5 trillion a year to get 420 billion (14 trillion economy * 3% growth) in growth you’re going to have a problem. Stimulus would only be worth while if the stimulus spending is less than the growth in GDP. There’s only one small window from 1997-2001 in the past 30 years where GDP grew faster than Government debt and that was during the internet boom.[/quote]
I don’t think the first part of your comment makes much sense. You’re essentially arguing that if we didn’t follow a particular economic model when the economy was decent, we shouldn’t try it now. Even though the model we did follow, didn’t work.
Beyond that, you’re mixing up a couple things. The purpose of stimulus would be to increase GDP, not decrease spending or debt. Ideally, that stimulus will increase GDP greater than the amount of the stimulus. The comparison to debt or annual deficits is false. The two are not directly related.
