A key premise of Keynesian economics is that government spending spurs growth per the Cato Institute. Many argue this is little different than throwing good money after bad. Pointing to the Japanese economy as an example, the Wall Street Journal highlights how a decade of government stimulus did not amount to a whole lot of GNP growth.
Perhaps what anti-Keynesian economics is overlooking is what will happen if stimulus spending does not occur. Government spending may not grow an economy by much, but it has prevented it from getting worse. However, as Chris Edwards of the Cato Institute suggests, long-run fiscal reforms are a suitable context with which to provide extended payroll tax cuts, a form of economic stimulus.
The reasoning behind calls for fiscal responsibility and anti-Keynesian sentiment is the undeniable growing national debt; a debt that the 'Congressional Super-Committee' failed to come to terms with per USA Today. That's just the fiscal side of things; the Federal Reserve Bank has also been spending to buy with massive balance sheet expanding bond purchases, loan loss backstops, commercial paper funding, 'QE1 and QE2' etc. The CNN Money 'Bailout Tracker' illustrates just how massive the spending has been.
The U.S. no longer controls more than 25 percent of global manufacturing, as evident in U.S. manufacturing employment data in a Reason Foundation report by Anthony Randazzo. Additionally, U.S. GDP as a percent of Global GDP translates to increased competition for global market share from Asia according to data from the International Monetary Fund. In other words, U.S. national wealth is not growing like it used to, but spending like it still is continues.
• Reuters: S&P ratings agency puts Eurozone on credit watch
• ISM: November non-manufacturing index slowed by .9%
• Zero Hedge: Euro zone banks borrowed €252 billion to lose .35%
• Asia Development Bank: East Asia growth rates to moderate
• The Economist: Britain entering recession despite fiscal policy
• Reuters India: Chinese service sector index declined 1.6% in November
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