[kazoolist]

Counter-point.

Public (gov't) spending "counts" in GDP, not because it's "expansionary", but because it's an expenditure on final goods and services. Even if government spending was contractionary, it would count towards GDP. That's just how GDP works.

Likewise, there are reasonable arguments that government spending is/can-be contractionary. (I won't try to show that such spending _is_ contractionary, just that it may be).

All that needs to happen for it to be contractionary is for each dollar of government spending to reduce (crowd out) private spending and/or investment by more than a dollar. Harvard economist Robert J. Barro has been arguing this is the case.

[redthrowaway]

Even if I grant all of your points theoretically, there are no real-world examples to back them up.

Libertarian (by way of Austrian) economics failed in this recession. Period. That's not to say that they don't lead to greater growth in the good times, but when the chips are down you want Keynes. You want large government intervention. Every successful recovery has rested on this principle, and every policy in opposition to it looks set to fail.

A rational government would apply the appropriate models in the correct situations; we are, unfortunately, stuck with self-serving idiots.