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The Forum > Article Comments > This is not the time to turn to Keynes > Comments

This is not the time to turn to Keynes : Comments

By Tony Makin, published 1/5/2017

The reality is, whatever is in the federal budget, it will most likely be negative for the economy, as part of the price to be paid for past fiscal excess.

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Keynes's theory on fiscal expenditure showed that public expenditure could boost the economy many times more than the expenditure in times of high unemployment. (multiplier)

However, Keynes's theories have been misrepresented to justify vast spending even when the economy is not in trouble. Keynes made it very clear that in times of low unemployment when the economy was strong, the budget should be in surplus.

Milton Friedman later showed that as unemployment approaches full employment (4%) that the multiplier shrinks as new public employees are taken from the pool of private employees, and increased public expenditure simply boosts inflation.
Posted by Shadow Minister, Thursday, 4 May 2017 10:01:12 AM
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