Keynesian Economics Actually Requires Trickle-down Principles to Work

I wrote an article a couple years ago detailing how Obama’s economic methods (Keynesian theory) actually rely on trickle-down, or supply side, economics to work.  In that article I explained

In order for the government to spend money it has to pick some “entry points” into the economy.  Obama has chosen and shown us 3 so far……Once the “entry points” have been defined, the government then injects the money into the economy through them in various ways….loans, tax credits, debt forgiveness, and stock purchases just to name a few.  Once the money is in the hands of these “entry points” it is up to them to spend the money.  This is where we switch to the Trickle-down model.

The Keynesian model says that in order to stimulate the economy the government should spend as much as possible even if it goes into debt, or increases the debt, in the process.  The theory basically says that the government is the only entity big enough to actually stimulate the economy.  It doesn’t really matter what the government spends the money on because the goal is to create economic activity.

Now for the interesting part.  Once the government spends the money it relies on trickle-down economic principles to do the work.  I described it this way

The new money is to be spent in such ways as to increase economic activity (buying, selling, expanding, etc.).  This increased activity by the “entry points” will cause more activity (buying, selling, expanding) for their suppliers. The process continues down to the next level and so on until it has affected every level or our economy. This is basically Trickle-down economics.

Keynesians will not agree with what I have said here but it is really just basic economics.  I would disagree that government spending is the only thing that can stimulate the economy when it is in a recession.  The government would better do that by lowering taxes and easing regulation on businesses.  As they see more opportunities they will take advantage and will be successful at creating a real recovery.  The Keynesian theory will create a temporary “recovery” but it will end as soon as the government spending does.

So the next time you hear the leftists talking about needing to increase government spending in order to stimulate the economy you will know the truth.  Let your representative know that the Keynesian model is flawed and they should abandon it in favor of the trickle-down model.  As proof look at the state of Texas.  It’s economy is booming because they have embraced the trickle-down model. 

What are your thoughts?