The Keynesians were never wrong. The issue is that the rich countries, especially the US, have never followed a Keynesian policy of minimal to no deficit during periods of private sector growth, They only follow Keynesian philosophy when they are in recession and they want to run high deficits then. Rather than acknowledge this, the austerity people scream out that Keynes is flawed, when in reality its the democratic tendency towards giving people low taxes and lots of services that is the problem.
Yeah, but this was during the 90s, a period of growth caused by IT and finance developments. That budget surplus was a result of high economic growth, not a cause. Which, incidentally, is what the data that R/R distorted so much supports: that low growth causes high public debt, not the reverse.
Erm. I think you're agreeing with me but thought I said something about the growth period's cause? I was providing a counterexample to his claim that "rich countries, especially the US, have never followed a Keynesian policy of minimal to no deficit during periods of private sector growth".
I don't think he is agreeing with you at all. The state just spent the social security surplus instead of going into debt. If you followed Keynesian policy you would of saved the money caused by the boom.
It can if you have a balanced budget mechanism which allows tax cuts only if they are paid for, based on a broad-spectrum analysis of GDP growth rate. Not one study, but a Nate Silver like approach to measuring GDP.
