A CONSERVATIVE INTELLECTUAL ON DEFICIT SPENDING

In this article in the Atlantic Monthly, Richard Posner gives a clear explanation of why deficit spending is needed to pull the economy out of a depression or recession. It's importance lies in the fact that he's the only conservative public intellectual who has done so.

Second, there is a pretty good theoretical case, and some empirical backing, for deficit spending on public works as a means of combating a depression. Output (GDP) is the sum of personal consumption expenditures, investment (including savings), and government expenditures. When personal consumption expenditures and investment decline, so that (if government expenditures are constant or falling) total output declines, which in turn results in layoffs, which further reduce income and therefore output, thus triggering a downward spiral, an increase in government expenditures can arrest or at least slow the downward spiral by replacing some of the decline in private consumption and investment.