1. in 1920 we saw a massive market crash - that was nearly as severe peak-to-trough as the one that would kick off the great depression later (sound familiar)? The government was running a huge deficit (sound familiar?) and millions were thrown out of work (sound familiar?). Did the government "stimulate demand" by taking money out of the productive sectors of the economy and pouring it into the unproductive ones? no, the poor fools in government didn't understand the intricacies of the economy, and so they just reduced taxes and reduced spending. Keynesians, of course, would have howled at such a scheme - and used many neat little charts to prove how, with rising unemployment, demand was already lowering, and lowering government spending as well would surely spend the economy into a tailspin as no one bought.... Instead we saw rapidly dropping unemployment rates, rapidly rising economic growth, the creation of the middle class, and a budget surplus. the peacetime unemployment rate they achieved hasn't been matched since.
2. WWII: we had just spent a decade and a half in the depression known as Great, when - according to the Administration's own Secretary of the Treasury - the government had spent unprecedented gobs of money attempting to "create demand", all of it to no effect. It turns out that the awesome strategy of taking resources from the productive sectors of society and pouring it into the unproductive ones worked out less well than they had hoped, and hiking taxes in order to pay for it all hadn't helped, either. During WWII we had deprived our citizenry of basic goods, forcing them into austerity through rationing in order to divert preciously rare resources (such as foodstuffs and rubber) to the military. Lots' of good ole wealth-building there.
And after WWII, what happened? Well, the push was to immediately curb the huge deficit spending (sound familiar?), which - it was claimed - was unsustainable and unnecessary (sound familiar?). And how did people like you respond? Well, Keynesians (up and down) swore (up and down) that reducing the massive deficit spending would reduce aggregate demand and send us back into the economic shambles from which we were just then recovering (sound familiar?).
and you know what? they were wrong then too.
just like they were wrong (again) when they swore up and down that a stimulus package in 2008 would "jump start" the economy.
just like they were wrong (again) when they swore up and down that a bigger stimulus package in 2009 would keep us below 8% unemployment...
and so on and so forth
Keynesian Predictions v American History. The record for you folks isn't pretty.
You know what the definition of insanity is, OC?
It's making the same mistake every time, but thinking you will get a different result.
But, hey, I'm a sporting fellow - and I do enjoy a chance to learn more about history. So please; regale me with even a single time in modern history that reducing government spending has caused the economy to collapse due to the reduced aggregate demand.