Opinion: Reagan the Keynesian

Not surprisingly Reagan's top economic adviser came out in 2009 and even though not popular by Republican's said Obama's stimulus was simply not enough.

I wish Republican's would listen to smart economic minds like that instead of the Sarah Palin's and Jim Boehner's of the world.

 

People don't realize it, but supply side economics is an offshoot of Keynesianism. It follows the same principle of public policy designed to inject money into the economy. The difference is that Keynes says to give the money to consumers (demand) while supply side says to give it to the "job creators" (supply).

 

tell me more about it.......

 

Not for the guy that is already having a hard time making ends meet and you take two thirds more of what he was making away. Chances are you just put him on the street. Not saying we don't need to trim fat in government, we do. But with so many out of work now, is this the right time to do it?

 

Well it was to much put in the wrong place and not enough put in the right place.

 

One tenet of Keynesian expansionary fiscal policy is tax cuts. Such tax cuts do not necessitate targeting of certain groups, thereby making supply side economics compatible with Keynesianism. In addition, acceptance of free trade, another stance of supply side economics, is widely accepted by all mainstream economists, including Keynesians.

 

Another swing and miss. Typical Keynesian brainwashed textbook scholar. How does that explain tax cut would increase $$$ in the economy? If anything, the government just take in less money, subsequently, it would spend exactly what it receives back to the economy, thus the total $$$ in the economy is unchanged.

You either have zero knowledge of government accounting or I simply assume you're pulling trick out of your ass.

 

Considering aggregate marginal propensity to consume is greater than 0.5, a tax cut leads to an increase in real gross domestic product greater than the tax cut cost. According to the Congressional Budget Office, as of February 2009, a temporary tax cut for people has a minimum multiplier of 0.5, and a maximum multiplier of 1.7. The average of the two is 1.1. Consequently, a tax cut in February 2009 should increase real GDP by a greater amount than the cost of the tax cut.

http://jec.senate.gov/republicans/public/?a=Files.Serve&File_id=aa63e97b-ad62-4910-884f-54ff1aa67c6f

In theory, if MPC is exactly 0.5, then a tax cut would probably yield no change in real gross domestic product. This is assuming a previous tax policy would generate an increase in revenue equal to the tax cut.

 

I'm not asking you what effect does tax cut have on the economy, re-read ConsAreVille post and make sure you understood what he was trying to imply before you spew another round of your textbook bull(*)(*)(*)(*) that no one understand what you're talking about. If you really want me to spell it out for you, I'm glad to do it....explain how tax cut would inject money in the economy please..

 

Tax cuts increase disposable income. Individuals and business are now able to engage in greater consumption spending and investment spending. More money is in the economy as a result.

 

Dude, did you pass 3rd grade math? Increase disposable income =/= increase money in the economy. Assuming there is $10 in the economy, government used to tax $3, they spend $3, now they tax $2 instead of $3, then they spend $2 back in the economy, thus $10 remain in the economy, it's the same.

$$$ can only increase when consumers are willing to take out new loans to start a business/invest/spend...etc. You're Keynesian brainwashed scholar only look at one angle of the economy and assume it's tax cut/increase that would fix the economy. In reality, it's consumer/business confidence that play a major role, to think otherwise is simply misleading.

 

If you are referring to the money multiplier, then yes, actual money increases when lending increases. The discussion ConsareVile on this thread would start is on fiscal policy.

 

Whatever.

 

He has yet to ever come to the realization that banks purchase debt from the Government the same way they make loans.

Source: http://www.rayservers.com/images/ModernMoneyMechanics.pdf

 

Our impasse is semantical in nature. He would correctly equate money and policy to the money multiplier, at least from my perspective. Comprehending his Austrian mindset, he largely uses praxeology and basic math. Still, I would respond to his inquiry towards ConsareVile by addressing the topic being discussed, fiscal policy.

 

We've been over this fallacy million times...

Read the New York Fed Guideline about US Treasury auction to educate yourself.

http://www.newyorkfed.org/research/current_issues/ci11-2.pdf

 

Sure! Fiscal policy is a hoax, as I easily point that out. But I doubt any of you brainwashed Keynesian would admit it.

 

Comprehension of the multiplier effect would allow you to realize how misguided your claim is. Economists use the multiplier effect to calculate changes in real GDP due to actions by businesses and individuals as well. One should realize that fiscal policy's intent is, and will always be economic stabilization.

 

In case you've been living under the rock in the last 11 yrs, tax has been at a lowest level in the last 30 yrs, using your fallacy Keynesian theory, the economy would be booming. Well...it's not. Not only the US economy suffered the worst recession in the history, but it's following Japan's path to stagnation.

Frequently throwing in "economists" use this and that does not put more weight in your argument. Sorry to burst your bubble.

 

Fiscal policy's intent is not increasing money in the economy. This is monetary policy and the banking system's role. It's goal is to stabilize the economy, something I can admit governments are mediocre at. Bush's fiscal policies would increase disposable income enough to allow for stabilization of the economy after the 2001 recession, yet would fail to put the breaks on his policies and cut spending while raising taxes. In addition, irresponsible monetary policies, questionable regulations, the lack of necessary regulations, and bad banking practices would lead to the financial crisis of 2008. The two stimulus packages would be poorly executed, thereby doing little to bring aggregate output back to potential output.

 

Interesting. Bush & Obama has spent $10 trillion yet US economy suffered 2 recessions since 2000, the last one is the worst, and we're on track to our 1st lost decade, if that is what you call "economic stabilization", you do need help.

 

Bush would stabilize the economy within about a year. He would need to implement spending cuts, tax increases, or both by late 2002, early 2003. He did not. Instead, we saw the Bush Tax Cuts, and spending increases due to two unnecessary wars. In addition, reallocation of private sector assets from financial markets to actual production of goods and services would be necessary.

If Bush follows actual course, Obama would need to allow the private sector to liquidate and deleverage, rather than propping up toxic assets from the Financial Crisis of 2008. Liberalization of the private sector to promote job growth, as well as tax cuts and spending increases, along with medium term spending cuts in areas with large multipliers is necessary.

 

I love the way Keynesian scholars talking from both sides of their mouth. They blame the failures of government stimulus package yet they support fiscal policy which by the way always include "stimuroid". You can't make (*)(*)(*)(*) up. Comedy (*)(*)(*)(*)ing gold.

 

Reagan's policies prove the legitimacy of government stimulus. First and foremost, I appreciate policies which allow the free market to work. Fiscal policy (along with monetary policy) should be a secondary mechanism to allow an economy to stabilize.

I would oppose government monetary policy to resolve the Financial Crisis of 2008. Rather than bailout financial institutions, the federal government would provide the private sector with a new bankruptcy mechanism to liquidate and deleverage toxic assets. The first step to economic stabilization would be freeing up private equity and other capital facilities to allow for growth capital to create market-based infrastructure systems, enhance energy industries, including renewable and alternative energy, among other efforts.

Regulations would be liberalized to eliminate superfluousness, to promote heterogeneity, positive robustness, and positive innovation, all the while limiting negative externalities. Private savings would be enhanced through an approach to liberalize the banking system by reforming savings deposits through creation of a new underlying currency backed by gold, increasing purchasing power, and disposable income. A free banking system could result from such a scenario, as well through the private sector liquidation and deleveraging structure.

 

Don't you ever get tired of talking from both side of your mouth? You want "policies" that would allow free-market to work yet you also support centrally planned economy. You can no longer keep your (*)(*)(*)(*) straight can you?