krebscycle

Absolutely nothing in Keynes work implies that reducing government spending  and/or  reducing the government deficit necessarily  reduces economic activity. The so-called liberals or progressives who keep claiming otherwise are confusing themselves.  For example, the government spent $122,000,000,000 in Afghanistan last year. If we immediately withdrew from Afghanistan at a cost of $10,000,000,000, and then invested $50,000,000,000 in public works we would reduce expenditures by $62,000,000,000 and almost certainly increase domestic economic activity. Similarly, if the government ended the carried interest loophole, tax revenues would go up by say $2,000,000,000/year. If that were coupled with $1,000,000,000 for say Teach America we’d be reducing the deficit and stimulating the economy.  Here’s

a clue: you can’t learn anything about the economic effects of changes in the level of public spending without knowing how the money is spent. When Keynes wrote that burying cash in holes in the ground licensing private companies to dig it up would generate economic activity, he was thinking about the effects of buying steam-shovels and hiring Mike Mulligan.  Giving tax breaks to Mitt Romney for destroying steel mills and firing their workers does not have the same effect.

Progressives and Liberals need to stop justifying GOP looting of the public treasury with fake-Keynes.  For God’s sake, have some self-respect.

See also: trickle-down-keynesianism