Quote from: RoadTrain on September 25, 2014, 03:02:51 PM

Quote from: snappa4ever on September 25, 2014, 12:58:01 AM

Quote from: RoadTrain on September 24, 2014, 08:16:11 PM

Quote from: zorke on September 24, 2014, 04:00:07 AM

Quote from: RoadTrain on September 22, 2014, 02:42:11 PM

And once again we come to the GDP calculating principle which clearly defines how government spending contributes to the economic output.

If the government spends an additional dollar then $1 is added to GDP. If as a result of the additional borrowing the government needs to borrow as a result of this additional $1 in spending the private sector will spend (lets say) $0.01 less, therefore GDP would decline by $0.01. The net effect in this scenario is that government spending goes up by $1.00 but GDP only goes up by $0.99.

That's a good explanation, but I don't see any reason why the increase in GDP is necassirily lower than additional government spending.
Keynes introduced a term to describe this effect: fiscal multiplier.

They are wrong. This is why in the 2009 stimulus package, it cost ~$300k for each job that was created that was paying at most ~$50k

If this actually worked then there would never be a recession because countries could simply "stimulate" themselves out of negative economic growth.

That's a weak argument. If you use a microscope to hammer in nails it's no wonder why it doesn't work well.
Budget is a powerful tool, but it should be used wisely. E.g. in expansionary economic regime increasing government spending might be pointless, while in a recession it makes a lot more sense.
http://www.nber.org/papers/w17447

He was arguing that you could prevent recessions by doing exactly what you are suggesting the government do.

IF the Kensians were correct then anytime there was a contraction in real GDP, the government could simply spend more money to "create" economic growth which would stop such recession.