Keynesian theory have been retranslated by almost all Economic schools of thought. It's most common translation states: Deficit spending by Governments will spur a lagging economy. Political policy has translated this into the statement: Government spending will increase Economic performance.

The Keynesian concept, as proposed by Keynes, erred in suggestion; proclaiming any type of Government Deficit spending would spur the Economy.  The results of the Great Depression proved him wrong. The more intelligent Economists determined Deficit spending only spurred the Economy, if it employed Workers in high income occupations; as it was their increase of Consumption which actually spurred the Economy. These Economists attest it was World War Two which ended the Great Depression.  It was not: The actual end of the Great Depression came through Resource and Labor Cost reductions, placing Consumer Products within the range of Discretionary Income of Consumers; though Government Deficit orders for high-tech Defense products generated a new class of high-tech workers with high levels of Discretionary Income for Consumption.

Economists, then and now, often miss the most important element of the Keynesian concept. The Economy must be in recessive conditions for Deficit spending to function without Countercyclical adverse effects. Resource Recovery must be less than 84% of normal production; which is not Full Production; but only a daylight/One Shift utilization of Recovery equipment with less than ten hours of Overtime per week. Production Costs must be falling naturally, with less than 57% of normal production; here, normal production equates to a 68 hours a week of Production equipment employment--considering both One Shift and Two Shift industries. Debate occasions as to the expressed Unemployment rate necessary, but it is well over 12%; this Author believes it must be over 18%, to avoid Countercyclical economic effects to the Deficit spending.

What are these Countercyclical effects? The Government places itself in direct competition for Resources and Production, without providing payment for those Goods and Services through taxation. This will incite Inflationary pressure, and suppress Consumption by Consumers and Private Production. Measures to suppress Inflation will further compress Consumption by the Private Sector. Transfer to forms of Consumption taxes increase the suppression of Consumption.

Current Bush Economic and Tax policy is destroying the viability of the Private Sector Consumption. Long-term effects of extreme Deficit spending rob the Private Sector of liquid funds, suppress Consumption additionally by refinancing of the Debt, and transfer Funds from Consumers to Investors. The American Economy is in a lot of trouble!

Lawrance George Lux
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