When it looks like there is a shift in major consumer behavior patterns, and possibly values of society, then the things that worked in the past won't work.  Also, all systems tend to run their course, and then are in need of new things to keep things going.  As of now, not sure anyone knows what that is.

These things didn't even work in the past anyway though.

I've been trying to swear off VGChartz, so this will be one of my breif posts.

Keynesism makes the faulty assumption that the government can usually spend money to fix the problem(s) at hand by instilling more consumer confidence, and re-start the spending cycle.

The faulty assumption lies on 2 premises:

1. The government can and will spend money in areas that will make us more productive, and better off. During Keynes lifetime, this was true. There was a large amount of capital improvements that could of taken place that could easily improve people's lives with the utilization of basic human capital. In the new millennium, this assumption is false, given what the past president (Bush) and current president (Obama) used government funds on. The vast, and I mean VAST majority of funds went into projects that employed people, but did not increase productivity. For example, I have a stimulus-funded project near my house. There is no lasting benefit to the project...Just a few contstruction jobs. When this is over, they will be let go, and no real enhancement will have taken place, given the road already existed, and was merely replaced. Likewise, Bush gave everyone about $1200 of free government money. Point 2 explains why this was incredibly stupid. At any rate, if the government *did* want to do the right thing with stimulus money, it could have used it on something that was totally impossible via private entities, much in the same way of the Hoover Dam. Bush/Obama could have funded a space elevator to give us new space-based jobs, but that didn't happen.
2. The money earned by jobs stays within the system that gives it away. Right now, America is facing a major trade imbalance....To the tune of $800 billion a year. With the imbalance being approximately 1/20th of GDP, we must understand that a significant amount of capital is going overseas. What does this mean? It means two things:
   1. By improving consumer confidence (retail spending), you do more to endanger the fundementals of the system, as opposed to helping it. The fact is, any increase in Akvod's shoddy chart equates to more money (currently) going to other nations, and losing money to others. In order to help America out, we need a neutral trade balance instead of 1/20th of GDP going overseas. Again, any improvement in retail spending does nothing for us, because we are simply sending that money to others.
   2. With the trade imbalance, less tax recipts are being rendered to our government. This means that the government will need to raise taxes exponentially higher to make up for the deficit. With a trade deficit, it is harder to neutralize any deficit spending, meaning that the government is far less reliable to reduce deficits in the wake of deficit spending.

In the end, it comes down to the fact that Keynes could not of comprehended massive trade imbalances post-WW2 (he died shortly after Bretton Woods and had he of lived, he would of most likely rejected his own theory in the wake of actual results), as well as the rise of social welfare, and expenses that simply do not correlate with good government spending.

Like SamuelRSmith said, the truth is that the government needs to allow for businesses to be as free as possible, and to cut the fat that caused the recession. If businesses cannot go bankrupt, reform, and re-build after a recession, we will be far worse off for it.

Ultimately, if the government would lower taxes, reduce regulations (whilst streamlining the major ones, to strengthen the needed ones), and simply allow people to create jobs themselves, we would be out of this mess. But instead, many governments like the US simply don't care about the fundementals of our economy, and would rather throw money at the problem, as opposed to fixing it.

And if this money flows offshore, and causes people outside of the U.S to be employed instead of having U.S jobs created by government spending, how does that fix anything?

The idea that all you have to do is cut taxes, and cut regulation, and somehow it wil fix everything, presumes that progress ALWAYS happens, and what is needed will always show up just in time, because markets are destined to cause this to be so.  The reality is that business doesn't exist to create jobs.  Business exists to maximize profits, by providing goods and/or services that have superior appeal to the marketplace, and finding ways to cut costs, whether it involves laying off people or not.

There is also a case of needing to see where the minimum spending level by government should be.  Would the economy be better off if America had no military and would become subject to easy invasions by a rival nation?  Do poor nations in civil war generate wealth?

And yes, the fundamental issues of the economy need to be dealt with, beyond throwing money around.  But saying cutting taxes will fix everything is a statement of faith, not a statement of reality.  The last administration cut regulation, spending and everything.  It failed to create sufficient jobs to keep up with population growth, yet businesses showed increased productivity.

Some of them appear to be getting the idea now.

Of course, I think they might just be scared out of their minds at the prospect of becoming the next Greece at the moment, so it remains to be seen if this new course will hold once things improve.  I won't be holding my breath.

...So how do you suggest you bring manufcaturing jobs back to America and/or fix the trade deficit?

I wasn't suggesting that lowering taxes is the be-all end-all. However, I am suggesting that since America has one of the highest corporate tax rates in the developed world, it causes problems for companies bringing jobs to America.

At any rate, really interested in hearing how you'd fix the trade deficit.

You can cut the trade deficit by cutting the budget deficit. Correct me if I'm wrong here, but isn't the budget deficit sustained by China buying a large chunk of it - which they do to keep their currency in a favourable position, harming US exports, and encouraging Chinese imports.

As far as I could find, we are second only to Japan in corporate tax rates.

More cutting of taxes?  So, you cut taxes.  Why would businesses hire Americans, and not people from places like India or China?  Will businesses, out of the goodness of their hearts, suddenly hire Americans, and set up shop here?

The way corporations are taxed is that their expenses are taken out before taxes are figured.  That means wages and other things, which is different than personal income tax (how does THAT compare to other nations?) where you take taxes out first and people live on the rest.  If you suddenly cut corporate tax rates, do businesses suddenly go on hiring sprees because they like to spend money?  Will the extra money motivate the corporation to work harder?  If you are a business, because you get more money, you look for it to find ways to maximize profits, without raising costs, or raising them as little as possible.  I believe other nations also use VAT (sales tax) as a way to raise income, so all corporate activities has a tax applied to it.  As value gets added to goods and services, a tax is applied on that value that is added.

Someone please point out someone who argues that corporate income taxes should be cut to match other nations, while personal income tax be raised on to make up the difference, and there be a VAT tax added also.  I don't see anyone doing that.

The reason why economists state that government borrowing is bad, is that it sucks off money that would go into investing in other areas.  If America didn't have the government debt, then all that currency China holds would have to flow somewhere.  Very likely it would return back to America and they would buy up assets here.  Eventually the trade deficit closes as the outflow of currency returns back to America to buy things.  For all we know, the Chinese could end up buying up the roads, and police forces and also government buildings.  They could also pay to have America change its constitution, so they could run non-Americans for different offices.