While it is impossible to predict the economic consequences of Mr Trump’s tenure, given his strategic preference for vagueness over policy detail, one thing is clear: any mention of Trump as a Keynesian president, just as in the case of Ronald Reagan, confuses “Keynesian” for “irresponsible” and generates expectations unlikely to be fulfilled.
Deficit spending can take one of three forms: tax cuts, spending increases or a combination of the two. Republicans, from Ronald Reagan to George W. Bush, and now clearly Donald Trump, favor large-scale tax cuts while concentrating additional spending on defense procurement.
If the objective is to provide a flagging economy with necessary stimulus, Republican deficit spending is a most inefficient means. John Maynard Keynes, who had no love lost for the working class, and harbored a keen interest in promoting the wellbeing of aristocratic folk like himself, nonetheless objected to large-scale tax cuts for a simple, practical reason: the trickle-down effect is a myth, to put his point in Reaganite language.
The reason that “trickle down” is a myth is that the rich are most likely to save a large part of the tax relief they receive, thus blunting its stimulus potential, or use it to go skiing in Switzerland, rather than to spend it in their demand-deprived community. This is why targeted spending on the poor was the British gentleman’s recommendation: because it stimulates demand much more efficiently.In defense of Keynes, Varoufakis points out that Keynes was a deficit dove that recommended balancing the budget over the cycle, running deficits in bad time and surpluses in good times. This where MMT economists part company with Keynes.
TRUMP: THE NEXT KEYNESIAN PRESIDENT? DON’T BANK ON IT
Newsweek, 16 NOV 2016