[strlen]

(Note, this is an honest question on my behalf -- I don't have a preconceived opinion on this matter.)

Do you have any data points about Keynesian deficit spending being effective in more recent times? I was under impression that it hasn't had much effect on Japan's "great recession" or when it was embraced in US under -- ironically -- republican presidents, most recently George W. Bush.

I recall "pump priming" also being used to justify tax cuts which came without accompanying spending cuts.

[nhashem]

We haven't needed Keynesian deficit spending in a long time because the Federal Reserve has done a decent job "moderating" economic cycles. Too much growth/inflation, put the brakes by raising interest rates. Too little growth, stimulate growth by lowering rates. Some economists call the 1980-2000 period "the Great Moderation" for this reason.

One of Japan's issues has been that its central bank was not with loose with monetary policy as it could be. Investors expected the central bank to raise interest rates at the slightest hint of a recovery... which they did, thus limiting recoveries. Ben Bernanke wrote a paper in 2000 (when he was a professor at Princeton) criticizing this -- http://books.google.com/books?id=WAgXuZxPvrUC&lpg=PA149&....

You really have to go back to the Great Depression for events that would enable a good analysis of the impact of federal deficit spending. I refer you or anyone else to Christina Romer's paper -- http://elsa.berkeley.edu/~cromer/What%20Ended%20the%20Great%...

Romer was one of Obama's economic advisors in his first term. She suggested the 2009 American Recovery and Reinvestment act should have been $1.8 trillion, instead of the $800 billion it ended up being[0]. She also, under political pressure, gave the estimate that the stimulus would keep unemployment under 8%. Oops.

This is typically what happens in practical execution -- due to political posturing, the stimulus isn't as much as it needs it be or is oversold in its ability to help. Then the opponents say "nyah nyah, stimulus doesn't work, all toy did was cause a bigger deficit, so let's cut government programs instead!" And then everyone acts surprised when cutting spending leads to an economic contraction and everyone ends up with an even bigger deficit. The UK has acted out this drama to the tee, to disastrous consequences[1].

[0] http://www.huffingtonpost.com/2012/02/14/escape-artist-noam-...

[1] http://www.guardian.co.uk/business/2013/jan/24/imf-george-os...