Lazy Keynesian thinking is found everywhere, even in places I least expect it. This is from Alan Mitchell’s column in today’s AFR.

The economic impact of the Gillard Government’s savings will depend on where they fall. If, as seems likely, it targets the tax breaks of higher-income earners, the impact will tend to fall on savings rather than consumption, and the effect on growth should be relatively short term.

So here is what understanding pre-Keynesian economics brings to you. If some economic change falls on savings it falls on investment and therefore will damage the economy. If it had actually fallen on consumption instead then the effect on the economy would have been almost negligible. Keynesian theory blots out most of an economist’s ability to understand the nature of the business cycle which is why hardly anyone saw the current slowdown coming.

Of course, to describe anything the Gillard Government does as a form of saving may be the most ludicrous part of all.