But in case monetary policy should prove to be ineffective because individual hoarding may counteract an increase in the quantity of money, Keynes recommended direct government investment through tax cutting and deficit spending. Keynesian economists rarely propose to tap the capital market to finance deficit spending. Their appeal to central bankers and deficit spenders has made their teaching rather influential the world over. It has given rise to the New Economics which has become the common everyday property both of the learned and of the laity, the mental furniture of businessmen, politicians, and professors. Unfortunately, they obscure the fact that the real burden of government is not the weight of taxation, but the dead weight of government spending.
Taxation is merely one of several methods of public financing.
Tax reductions without spending reductions merely shift the burden of government from taxpayers to the loan market where government crowds out business and consumes the people's savings. Government spending, thus financed, causes interest rates to rise, investments to decline, and economic conditions to deteriorate. Tax reductions without spending reductions are shams that may deceive the voters, but do not lower the burden of government. Supply-Siders would not change the monetary system, but would manage it differently. When the price of gold rises to a maximum, the Fed would contract the total volume of credit to exert downward pressure on the price of gold.