The idea in itself is sound, but generally works horribly as most governments only follow Keynesian partially not fully. Otherwise they run deficits during a recession, but continue to run them during growth. Keynesian says you spend more during recessions to stimulate the economy, but cut back during growth however governments very rarely do the latter thus why it often hasn't worked well. If they followed it fully instead of partially it would work well.
Why do you think it is sound?
Governments are made up of people too which are irrational actors. Why give them the keys to the economy when they do not have perfect information? Why not let individuals and companies decide in the marketplace? On the scale of an entire country of the size of the US with 320 million people it is hard to ask for someone to really know what is the right mix of spending in the market at any time in the business cycle.
The Fed's own admittance of failing to understand why inflation is the way it is and the yet they still have a reading of the economy and decide to raise rates or hold. It paints the picture of the dangers of the lack of information in the monetary field as well as the trust in technocrats to plan the economy. It is a similar one in the fiscal policy field and government dollars during the recession are coming either from the Treasury - tax collection or from the printing press.
It is telling that Keynes himself even after bank run warning signs were going off that he saw nothing wrong and failed to see the looming Depression.
Likewise, many neo-Keynesians such as Paul Krugman were in the dark on 2008 and then later spun info like the Obama stimulus where it was a case where the economy further worsened to say 'well it would have been even worse without it.' Or for 2013 during the timing of the sequester by the Republicans was the talk of the day he mentioned about not wanting to be like Europe with their experience with austerity cuts but when the economy did not sink as he predicted he turned around and credited it to Obama's stewardship of the economy.
Economics isn't about some fantasy perfect alternative that libertarians/Austrian School types present, economics is about choosing among a limited selection of imperfect alternatives. Keynesianism/fiat money 'backed' by central banks has its imperfections, but the alternative you support is a joke.
If anybody wants me to put some meat onto this bone (not that anybody has asked), as I like to point out, for anybody interested in macro-economics (which I'm actually largely not all that interested in, but I can go with it to a point)
www.measuringworth.com is a great site.
1.For what it's worth, a central bank whose sole purpose is fighting inflation is actually following Monetarism and not Keynesian, but be that as it is (The Fed has a so-called duel mandate, but the actual people on the Fed have chosen to define that the best way to bring about 'full employment' is through low and stable inflation, which is also the other part of the mandate. I don't know if they've ever stated that explicitly.)
If you check, inflation for instance,
https://www.measuringworth.com/inflation/, you'll see that despite whatever questions the Federal Reserve may have in understanding inflation they've actually done a pretty solid job of keeping yearly inflation rates within a narrow range, from 2000-2016, for instance, the inflation rate ranged from -0.36% (2009) to 3.84% (2008). For 10 of the 17 years, the annual inflation rate was between the 1-3% range the Fed desires.
Taking a look at a random sampling of years while the U.S was on the Gold Standard, I choose at random 1890-1906 (random other than deliberately excluding the 'Panic' of 1907). Inflation ranged from -4.36% in 1894 (after the 1893 'Panic') to 2.28% in 1903. 6 of those 17 years have inflation rates of between 1-3% but five years are listed as having an inflation rate of 0.00% which I find a little hard to believe. So, not too bad, but if you accept that there are sound reasons to have a little inflation, the Fed clearly has done a better job than the Gold Standard.
2.If you check the numbers before the U.S had a national currency, the inflation rate frequently swings wildly from year to year.
3.In regards to actual Keynesian economics, the idea of priming the pump (although lets not forget that term didn't exist prior to Donald Trump inventing it this year) may not be perfect and, sure, nobody knows what the 'proper' amount of spending should be, but if the fiscal policy is a bit off from the 'proper' amount, so what? How bad is the marginal harm?
Contrast that with the Austrian School idea that the government shouldn't get involved because, well it just shouldn't! and consider the harm from waiting for 'market forces' to self correct so that input and other material prices fall low enough to the point where businesses start hiring again. (Assuming those businesses are even still in business.)
4.I realize less was understood about economics during the time the U.S was on the Gold Standard (which probably isn't a coincidence) but I would ask you to find me a gold bug prior to the 'Panics' of 1893 or 1907 who predicted those events.
5.Finally, you've misused the term 'plan the economy.' The Federal Reserve attempts to regulate the economy by regulating the money supply. 'Planning the economy' refers to socialism.
I should find the exact quote and person because it's very impressive and because it was said more than 1,000 years before Adam Smith, but some Chinese philosopher said something like "There are 4 parts to an economy: printing of currency, banking, production and trade/commerce. By judiciously controlling the printing of currency the government can successfully regulate the other three."
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