Every time Keynesianism fails, they say is evidence it was not done hard enough.
In Japan, they decided that this time they really would do it hard enough. And it worked.
Rapid inflation ensued. Employment and production did not.
I suppose Keynesians will be telling us that it is early days yet.
Superstimulus in Japan has definitely solved the problem of wages being sticky downwards. Prices are up, wages are not. This, however, is merely more efficient adjustment to a poorer, more backward, less technologically advanced, Japan.
Krugman is fond of telling us that “austerity” does not work. By “austerity” he means raising taxes that are already far above the Laffer limit. It is unsurprising that this does not work.
“Austerity” is always raising taxes, yet somehow, strangely, “stimulus” is seldom cutting taxes, and is never significant and substantial cuts in taxes on the rich, on the group most likely to respond to tax cuts. If a “stimulus” cuts taxes at all, it cuts them primarily on the poor, on people likely to be below the Laffer limit.
In a society where markets are free, and government is small, and prices and wages are sticky due to the influence of custom and expectations, Keynesianism might well be true, or at least somewhat true, at least in the short run, until people’s expectations adjust. In the great depression, prices and wages were indeed sticky, not because of custom and expectations, but because government forbade changes in prices and wages, thus Keynesianism was legislated into reality.
When, however, government is large and getting larger, eventually supply side effects are going to substantially outweigh Keynesian effects, supposing that there are any Keynesian effects in a society where government does not meddle too heavily in prices.
With the ever leftward movement, supply side economics has become true. Thus, any cut in spending that makes things worse for government employees and people on welfare stimulates, and any cut in taxes paid by the private sector also stimulates.
It would also stimulate if we forced everyone on welfare or government employment to dig holes and fill them in again. It would also stimulate if every woman who produces a fatherless child was publicly punished.
Conversely, any politically correct “stimulus” will cause stagnation. If stimulated sufficiently, we get what is now happening in Japan, stagflation.
Reagan demonstrated that supply side economics was true. If true then, much more true now.
It is often pointed out, against supply side economics, that the Bush tax cuts did not pay for themselves. But the Bush tax cuts on the rich more than paid for themselves. What did not pay for itself was substantially reducing the number of Americans who paid any income tax at all.
Leftism is always expansion of the state. Leftists have realized that the expansion of the state is a problem, have retreated from socialism, cut taxes on the very rich, denationalized industries, but the logic of progressivism requires movement ever leftwards. If they retreat in one area, they must advance in half a dozen others. Thus, when cripples were the object of legislation, the government confiscated staircases and the best parking spots. When cross dressers are the object of legislation, the government confiscates bathrooms, and guarantees free hormones. That men and women do equal work requires a no lift policy. Thus every movement left suppresses the private economy, the economy on which modern leftism depends. Economic stagnation is primarily an indication of the left singularity approaching. The left no longer proposes outright nationalization, but regulations multiply endless, causing creeping nationalization. Economic leftism, socialism and nationalization, has been abandoned, but every alternate left wing program creeps towards the same goal. Giving up on anthropogenic warming, they double down on gays and cross dressers, which less directly and less drastically harms the economy – but still harms the economy.