Recently President Bill Clinton shocked his fellow Democrats in Washington, and just about everyone else, by bowing far toward Republican proposals for balancing the federal budget, proposals inaugurated by House Speaker Newt Gingrich in his "Contract with America." In doing so, the president took the advice of GOP political consultant Robert Morris in preference to that of his long-time adviser, Robert Reich, who is serving as secretary of Labor at the moment.

Secretary Reich had warned the president that imposing too much budget austerity too fast would pull money out of circulation and induce a depression. He was talking Keynesian principles.

It is easy to suppose that Speaker Gingrich and others of the new Republican leadership have little respect for Mr. Keynes or his principles. President Clinton seems not to have made his own position known, or if once pronounced, he seems to have followed his notorious habit of changing his position, sometimes not even before reaching midstream.

In order to refresh memories, let me explain that John Maynard Keynes was an affluent English stockbroker who is generally regarded as the guru of the macroeconomic policies of the United States and most Western countries during and after the Great Depression of the 1930s. His views have long been viewed as sound in many Oriental economies, particularly in Japan, where Western ideas and principles are generally ignored in favor of homegrown varieties.

In reality, Keynes has usually been over-credited. When Franklin Roosevelt was battling the worst economic downturn in U.S. history, he began what was then called "pump-priming" which called for the same measures advanced by the British economist. But FDR began priming the pump before Keynes ever published his first volume, General Theory, in 1936. The New Deal was well under way by then.

But Keynesian thinking spread fast, and lasted. Even Richard Nixon as president averred, "We are all Keynesians now." Editorial editors of the Wall Street Journey promptly checked themselves into mental wards all over New York City.

John Maynard Keynes was frightened by the tendency, as he saw it, of market capitalism to stagnate---to stall at less than full capacity. Idle plant and high unemployment are politically dangerous, Keynes warned, to say nothing of the economic dangers to a majority of low and middle income workers.

Keynes thought central governments should take steps as necessary to influence a nation's economic activity. He especially focused on monetary and budgetary policy, strongly advocated running a budget surplus during good times and a deficit during bad periods. Most countries, including our own, have gone half-way, adopting only the second part.

It's pointless to argue over the soundness of Keynesian principles. They apply whether acknowledged or not. A market capitalism economy is one big circle with reverse flows---of money in one direction, and of goods and services in the other. The two must balance. If they don't, the economy will either overheat, with inflation, or will lapse into depression.

To expect today's American economy with its Gross Domestic Product of $7 trillion to work so smoothly that everything will stay in balance is to expect too much, far too much. The danger points are two. One relates to investment. Unless business profits taken from the money stream are moved back into it and spent for new productive capacity, the economy will stagnate. Unfortunately, investment tends to be cyclical.

The second point of danger is rarely mentioned. It opens up the touchy subject of income distribution. Let's put it bluntly: too uneven a distribution will shrink the economy. Ours is a mass production economy and depends critically on mass markets. It will function well only if consumers have enough income to enable them to buy the food, clothing, shelter, education, holidays and other constituents of the American living standard. If the super rich siphon out too much money, those markets will falter.

In other words, market capitalism has to be reasonably egalitarian, economically as well as politically. Current trends in the United States are not encouraging. Concentration of wealth and income has increased materially in recent decades. Someone in the White House and Congress needs to recognize that since the day Richard Nixon announced he was a Keynesian, back in 1 972, the median earned income of men ages 25 to 34 has fallen by 26 percent in inflation-adjusted dollars. Not since the days of the Great Depression has the fastest growing economic class been those living below the poverty line.

~Jack Stapleton of Kennett is the editor of the Missouri News and Editorial Service.