Here's the problems with so many of the Keynesian ilk (see econ 101). They totally forget one half of the basic theory (and it's a big f'in one half) which is this..... during good economic times...... government is supposed to retract.
Let’s say you’re the leader of the free world. The economy is stuck in the doldrums. Naturally, you want to do something.
Many economists say we need another stimulus bill. They debate about whether the stimulus should take the form of tax cuts or spending increases, but the ones in your party are committed to spending increases. They trot out a plausible theory with computer models to go with it. If the federal government borrows X amount of dollars and pumps it into the economy, that would produce Y amount of growth and Z amount of jobs. In a $14 trillion economy, you’d probably have to borrow hundreds of billions more to have any noticeable effect, but at least you’d be doing something to help the jobless.
These Demand Side theorists are giving you a plan of action. But you’re not a theorist. You’re a practical executive, and you have some concerns.
These Demand Siders have very high I.Q.’s, but they seem to be strangers to doubt and modesty. They have total faith in their models. But all schools of economic thought have taken their lumps over
the past few years. Are you really willing to risk national insolvency on the basis of a model?
Moreover, the Demand Siders write as if everybody who disagrees with them is immoral or a moron. But, in fact, many prize-festooned economists do not support another stimulus. Most European leaders and central bankers think it’s time to begin reducing debt, not increasing it — as do many economists at the international economic
institutions. Are you sure your theorists are right and theirs are wrong?
Why is this important? Because our government has been priming the pump with deficit spending for generations. As a result, our economy has become "addicted to it" to the point that it's needed to just maintain status quo.
It's like a crack head who needs more and more of the substance in order to get more buzz out of it.
Now, it may take trillions in stimulus, which the country can no longer borrow, to get us back to an 2008 equilibrium point we couldn't sustain even if we wanted to. Hence, the crash in the first place.
But try telling that to a Nobel Piece Prize (error intentional) winner.
But what would I know, I only paid attention in my Fiscal Policy econ course.