Originally Posted by iammatt
I think you mean raise taxes and cut spending. Right? Anyway, would that anybody were smart and omniscient enough to know when to cut, when to raise, by how much etc. Keynes felt the same thing, btw, towards the end. It is the fundamental problem.
You're right - I did mean raising taxes in that part of the cycle. During the recession you would, as a pure Keynsian, cut taxes - but foreshadow raising takes in better times to pay for the additional spending. In good times you would raise taxes while promising that the long-term plan is to reduce these taxes once the debt is paid. This will always be one of the problems with a pure Keynsian approaches, imo - people spend and make economic decisions based on an awareness of future possibilities, like taxes. There was some interesting work done on this in the 70s looking at workers' growing awareness of inflation during wage negotiations.
Agreed on your other point as well. I think Keynes made a huge contribution to our understanding of economics and there is still much of value we can apply today. But getting too gung-ho with that sort of approach is tempting fate too much - get it wrong and it all goes wrong very badly.