Tuesday, October 18, 2011

Have we had spending cuts?

There have not been spending cuts. It is a myth.

There may be need for more spending to offset cutbacks by consumers in order to increase aggregate demand, but that is a very different argument than saying there have been spending cuts. A Keynesian story states that government may have to grow more to make up for less spending in other parts of the economy. We believe that more fiscal stimulus is appropriate but it has to be argued from a starting position of clarity concerning government expendtures.

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