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/w17447He 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.