“A Keynesian would say that increasing government spending would have a multiplier effect; however, it also increases public debt and withdraws that portion of money which would have a similar multiplier effect in private hands without increasing public debt. Harrumph. “
It has nothing to do with Keynesian multipliers because simply spending money on anything won’t do very much. You have to spend money on things that the private sector won’t do very well such as DARPA projects and the Space Program (which Obama wants to end). I don’t think the US would be what it is today without the interstate highways, national phone service, the internet and the fruits of our science research programs.
Yes it does, and nobody disputes the claim that spending increases aggregate demand [except, perhaps, you.] Bill's argument is correct. Keynes himself knew it: asked specifically about what his theories would do in "the long run," he gave a famous -- and typically liberal -- answer. There is every indication that the "stimulus" had a multiplier less than 0.5 once we get all the downward adjustments done in a year or so. That is truly pathetic when you consider that long term borrowing or taxation we need to pay it back will certainly have a negative effect on aggregate demand much larger than that.