Sunday, May 6, 2012

Chris Edwards - A Contradiction in Keynesian Fiscal Policy

Yet how can a Keynesian administration or Keynesians in Congress ever make a “credible” medium- or long-term commitment to deficit reduction? As soon as the next recession hits, they will demand ripping up any previous deficit-reduction deal so that they can stimulate aggregate demand some more.
Read it at Cato @ Liberty
A Contradiction in Keynesian Fiscal Policy
By Chris Edwards
(h/t David Henderson at EconLog)

While I don’t disagree with the Keynesian cohort that more fiscal stimulus now could improve GDP growth in the short-term, I don’t think either political party can make a “credible” claim to reign in spending in the future. Both parties during the past 12 years have overseen massive spending increases with relatively little to show for their efforts. It’s hard to envision either side willingly choosing to reduce their power (level of spending) once in office.  

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