Crude Keynesianism Versus Subtle Keynesianism

Jeff Sachs summarizes his ongoing debate with Paul Krugman.  Sachs does not believe that the Great Recession was just another business cycle triggered by a collapse in aggregate demand.  He argues that structural changes in the economy led to the decline in aggregate demand, and that we should have focused attention on fixing the structural problems.  The Fed did what it needed to do.  It provided liquidity to the banking system.  That was necessary to revive the frozen credit system.  The stimulus package, however, failed to resolve the underlying structural problems in the economy. He describes some of the structural problems that should have been addressed by fiscal policy.  They were not addressed, and it is too late now to get them through Congress.  Obama should have taken advantage of the recession to invest in our future.  Instead he took a "crude" Keynesian approach to increasing aggregate demand.  Consequently, we have more debt and we have nothing to show for it.  The debt is not a burden today because of exceptionally low interest rates.  It will become a problem when interest rates return to normal and the cost of debt service squeezes out government spending on necessary investments in our future.  Sachs concludes his debate by citing Keynes who advocated more targeted spending during Britain's recovery from the Great Depression.