Quote from: polynesia on September 26, 2014, 05:29:54 PM

Quote from: RoadTrain on September 26, 2014, 02:43:49 PM

Quote from: redHeadBlunder on September 26, 2014, 03:41:15 AM

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.

Do you know that it's exactly what US government did in a latest recession? Do you know that in a recession the budget deficit rises naturally (it's called automatic fiscal stabilizers). It's hard to measure the efficacy of government efforts in the latest recession since a lot of support went to the financial sector, but it certainly helped mitigate the recession.

The fact that US is doing relatively well now is because they don't have austerity unlike the depressed Europe.

And a government can spend its way out of a recession, but it's very sluggish in such kind of actions (usually actions are taken only after a recession starts, when it already has momentum).

The problem is that it does get difficult to cut back on spending once you are out of a recession.
There are various special interest groups, which have a vested interest in ensuring that there are no cuts.

I agree, it's sometimes difficult politically, that's why many spending increases are designed as temporary "packages", so that governmet has some flexibility when they expire.
Still, any changes require political will.

Also, when you are out of a recession, the deficit decreases naturally, as does countercyclical spending (like unemployment insurance outlays), while revenues increase.