Government Debts and Inflation: 
Stumbling-Blocks in the Way of Keynesian Full Employment 
Policy 
It has been maintained, or pretended, that Keynesian policies 
have failed because of obstacles which made them unworkable. 
Among these are most prominent foreign balance deficits, 
accumulating government debt and inflation. I do not really 
believe that these have been sufficient to cause the great 
change in economic trends and in people's outlook since 1974 
(or earlier), but they are serious problems, and, apart from 
the foreign balance problems which all Keynesians have been 
fully aware of, and which depends entirely on international 
cooperation, they have not always been taken seriously 
enough. 
I. Let me begin with budget deficits. Kalecki used to argue 
that the burden of public debt, internally financed, was a 
problem of taxation only. The interest on it could be 
financed by a tax on wealth (or by an equivalent form of 
income tax - Kalecki's "modified income tax") and would 
therefore only involve a transfer of income between capitalists 
This is in principle, as true as it was then. But even if 
we suppose that the tax problem would be solved in Kalecki's 
spirit, the transfer would be from entrepreneur to rentier, 
thus from a functional to a non-functional group of capitalists