I manage to take on both Keynesians and Market Monetarists in this blog post, while sparing David R. Henderson. It’s like in the arcade when you shoot the bad guys without hitting the civilians. (David R. Henderson might even call himself a Market Monetarist; I’m not sure. Don’t ruin my joke.) The conclusion:
The experience of Canada in the mid- to late-1990s shows that it is entirely possible for a government to engage in relatively large spending cuts without plunging the economy into recession. The fact that Canada’s “fiscal austerity” went hand-in-hand with plunging interest rates and soaring net exports isn’t a lucky coincidence to be attributed to wise central bankers, but instead is the natural outcome from reversing the government’s siphoning out of billions from the loan market. The Canadian government simply reversed the familiar stories of “crowding out” and “twin deficits” with beneficial results for its citizens. Other governments should learn from the episode.