The Keynesian 'Wall Street Journal'

The Wall Street Journal is out with its "The Economic Forecast for 2019," for its paid-subscribers.

The second paragraph of the report begins:

The past year was marked by strong U.S. economic growth, supported by a burst of fiscal stimulus from federal tax cuts and spending increases.

This is pure Keynesian style analysis, where Keynes was wrong. Fiscal stimulus does not increase spending, it only shifts spending, primarily from the private sector to the public sector.

Further, when you have tax cuts that are not accompanied by cuts in government spending, you merely have a shift in the manner by which the government sucks money out of the private sector. Instead of money being taken by taxation, it is taken out of the private sector via more government borrowing which crowds out private sector borrowing. This is particularly horrific because it shrinks funds flowing to the private capital goods sector, thus, shrinking productivity within the economy. Or by Federal Reserve money printing which puts upward pressure on price inflation.

The explosion in fiscal "stimulus" was a negative for the economy.

For a page by page refutation of the General Theory by John Maynard Keynes, see: The Failure of the New Economics by Henry Hazlitt.

-RW