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Trump’s Economic Era

employment, production and purchasing power along
with his goals to achieve full employment. The main
purpose of the act was to lay the responsibility of
economic stability of employment onto the federal
government.

THE KEYNESIANS
Keynesians believe that fiscal policies can avoid
a liquidity trap, take advantage of the balanced budget
multiplier, and prevent the paradox of thrift.

A liquidity trap occurs when too much money is
trapped in banks despite low interest-rates—causing an
interruption in the circular flow of money and
worsening unemployment. Banks are the heart of the
economy— money comes in, and money goes out. The
economy slows when the supply of money circulating
is insufficient to maintain full employment.

If consumers and investors do not borrow enough
money, which causes a liquidity trap, the only solution
to this problem is for the government to prime the pump
by borrowing this bottled up savings and inject the
money into the economy. On this, Austrians and
Keynesians agree. When the Economist Magazine
asked President Trump on May 4, 2017, if it would be
okay if his tax plan increased the deficit, he answered it
would if we need to “prime the pump” for a short time
to spur economic growth.

Keynesians justify deficit spending because of the
balanced budget multiplier. The government balances
the budget when it spends what it takes in through
taxes, no more, no less. The balanced budget multiplier
recognizes that consumers will save a portion of their

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