The eternal hostage situation

Via here. Left-center Keynesians sometimes like to make arguments that the constraint in mass purchasing power from the reduction of government spending or, for that matter, increased inequality has negative consequences for the operation of the economy as a whole. This argument amounts to a claim that in some cases, what is best for capitalism is to support the living standards of the majority of the population. The resistance these arguments receive from the representatives of capitalist interests suggests that this is largely wishful thinking. To wit (though I'm too lazy to look at how valid the findings cited actually are; there's apparently a lot of room for mischief in this kind of data analysis):

Economists have engaged in some lively debates about how to measure and evaluate the effects of large fiscal adjustments episodes in OECD countries (Europe in particular). But a careful and fair reading of the evidence makes clear a few relatively uncontroversial points, despite the differences in approaches. The accumulated evidence from over 40 years of fiscal adjustments across the OECD speaks loud and clear:

• First, adjustments achieved through spending cuts are less recessionary than those achieved through tax increases.
• Second, spending-based consolidations accompanied by the right polices tend to be less recessionary or even have a positive impact on growth.

These accompanying policies include easy money policy, liberalisation of goods and labour markets, and other structural reforms.
. . .
Tax-based stabilisations not only eventually fail, in the sense that they are unable to stop the growth of the debt-to-GDP ratio. When these fiscal packages are announced entrepreneurs’ confidence falls sharply, and this is reflected in a fall in output. On the other hand, spending-based stabilisations (especially if accompanied by appropriate contemporaneous polices) do not negatively affect economic confidence contemporaneously. Moreover they are often accompanied by an increase in output within a year.