Aggregate Government vs. Aggregate Demand

I thought this analysis of government was interesting, primarily in how it inspires a response:

You hear all the time that demand must increase. … “We’re going to continue and renew our efforts for a increased aggregate demand.” Barack Obama approved of stimulus that made the government larger and more expensive in order to create infrastructure to give taxpayers a greater bang for their buck. And a large majority of Americans agree in the abstract (while simultaneously opposing any significant tax increases).

Liberals like to point to low levels of federal taxation and spending —as evidence that demand is too weak. But the idea that there is one thing called “aggregate demand”—and that you can measure it by looking at total purchasing—makes no sense. Worse yet, it can lead to fundamentally misguided policy decisions.


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