This is actually exactly what's supposed to happen, and (broadly) what Keynes suggests. Economic fluctuations are inevitable, but actual Keynesian policy (which has never really been properly implemented, and are largely in line with what you propose above) is supposed to act kind of like a compressor in audio recording - smoothing out the peaks of a boom period and the troughs of a depression to keep them within a reasonable limit.3278 wrote:I've been thinking a lot lately that perhaps part of the government's services toward its people should be moderation of the economic system; I'm still not sure it's a place I'd want to live, but I think a system in which the government takes the information we have about economics and acts on it. Why not, rather than spend our way out of recessions, act during the boom-and-bust cycle to moderate growth and temper losses, like the cruise control of a car applying more or less power to maintain speed.Salvation122 wrote:This is not to say that the money Keynes posits should be spent in a recession should not be spent wisely, and it also requires that we, you know, cut back on unnecessary bullshit when times are good. Keynes isn't saying we should, for example, drive ourselves ridiculously into debt to pay for national healthcare (or a terribly mismanaged and largely unnecessary war, if you'd rather.)
But we can't do that, because no elected official ever got his job saying let's limit growth and try to achieve sustainable stability. Unless and until the populace begins thinking long-term, the elected officials aren't going to think long-term. That change will take time, and probably several more costly recessions.
You do this through debt spending (additionally spurred by lower taxes) in the trough, and repaying that debt in the boom. Unfortunately, that means that in the boom period, you have to hike taxes and interest rates. Voters never, ever like hearing that their taxes will be going up (unless you do it very, very carefully and/or levy the bulk of the tax increase on a relatively small number of people - say, cigarette smokers, or the rich) and businesses hate having interest rates go up. This leads to debt spending in the troughs that never goes away, which can lead to a positive feedback-loop problems (zomg inflation and debt defaults!) on large enough timescales, or shorter ones if you incur so much debt that you have to monetize some of it.
It's worth noting that - without taking into account deductions, which only exacerbates the disparity - those in the top tax bracket are paying less in taxes under Obama's proposed tax hikes than they were under Reagan, Patron Saint of Conservatives. And those numbers weren't corrected for inflation - 175k (the number I used) was a lot more money thirty years ago.