Britain’s Prime Minister David Cameron stopped by NYU yesterday to speak to a group of students. He spent most of his time answering questions, including this one about 21 minutes in (lightly edited for continuity):
Q: Is Keynesianism dead?
A: I don’t think there’s a huge difference between our approaches [stimulus in the US, austerity in the UK]. We both want to get growth. We both want to deal with our deficits. We both realize that we’re borrowing too much money, that we’ve built up too much debt and we have to deal with that. …
As for Keynes: of course government can stimulate economic activity by cutting taxes or increasing spending, that can work. But when you’re borrowing around 10% of your GDP, as we were in 2010, when your debt is growing, when the markets are beginning to question, are you going to deal with your deficit and pay your debts? Then the idea that a fiscal stimulus will boost your economy, when actually you’d get punished by the markets and your interest rates would go up, I think is questionable. So I think you need to be practical about these issues.