Misplaced Criticism of Keynesian Theory

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The internet and talk radio are filled with criticisms of Keynesian theory by those who have never studied his writings. He is described as an advocate of government spending who is responsible for large public deficits. They are wrong on two counts. In the first place Keynes only supported government spending when an economy was in recession. He argued that governments should run surplus's in good times so that they had funds to support increased spending in bad times. Critics of Keynes should recall what Bush did with the budget surplus that he inherited from the Clinton administration. He cut taxes to get rid of the surplus.

The other problem with those who blame Keynesian theory for budget deficits is that recessions create budget deficits without any increase in discretionary government spending. This is because tax revenues decline in recessions and social safety net costs rise. Most of our current deficit is the result of falling tax revenues and safety net costs and not due to increases in government spending to stimulate economic growth. Many Keynesians argue that we failed to take sufficient actions to stimulate growth and that is why the recovery has been so weak.