What is your position on gov't....??????

[droski]

I think BB has too many connections and ideas still from Greenspan. AIG, Merrill Lynch Merger/BOA.

Not having control over fiscal policy is given, wish he could have some job giving input on fiscal policy and monetary, that would be nice.

To quote PK on the 1970s

One argument you often hear from anti-Keynesians — it pops up in comments here — is that the experience of stagflation in the 1970s proved Keynesian wrong. It didn’t; what it did disprove was the naive Phillips curve, which said that there’s a stable tradeoff between unemployment and inflation. By the end of the 70s most macroeconomists had accepted some version of the Friedman/Phelps natural rate hypothesis, which says that sustained inflation gets built into price-setting, so that inflation can persist for a while even in the face of high unemployment. But that’s very far from rejecting the basic Keynesian insight that demand matters.


Here’s what happened: the Fed decided to squeeze inflation out of the system through a monetary contraction. If you believed in Lucas-type rational expectations, this should have caused a rise in unemployment only to the extent that people didn’t realize what the Fed was doing; once the policy shift was clear, inflation should have subsided and the economy should have returned to the natural rate. If you believed in real business cycle theory, the Fed’s policies should have had no real effect at all.

jesus cut and paste, cut and paste. have any ideas of your own?

 

[volinbham]

Not to run to his defense, but I read it as droski just taking a swipe at OE.

me too

 

[droski]

No never never never

 

[volinbham]

Obama doesn't need to listen to Krugman. He has plenty of people as well or better qualified telling him exactly what Krugman would.

I imagine the long term asset binge will further crowd out private borrowing and stunt economic recovery.

 

[BigPapaVol]

I imagine the long term asset binge will further crowd out private borrowing and stunt economic recovery.

I can't imagine anyone assumes that a viable option. The rate gulf is purely about inflationary expectation, which have remained relatively low considering everything we've done now to induce enormous inflation over the next decade.

 

[paul1454]

Cutting entitlement programs now would be a disaster in the making, as 15 million individuals are unemployed right now, that would be no different then raising Taxes, raising interest rates, and cutting spending during a recession.

But you seem to suggest in earlier posts that we should not cut them EVER and that, post-recession, to get federal spending back in check the solution should be to reduce military funding. I suppose, at least so it seems, that we have a fundamental disagreement as to the role of the federal government. Because citizens are better able to maximize utility by making their own spending decisions on a micro level, the reduced incentives of government bodies to operate in the most cost-effective and effecient manner, and because the problem of deadweight loss when paying for government programs - I tend to have an "only what is necessary" approach to the role of the federal government. What makes entitlement spending better suited for our federal government than military spending? Does priviatizing military defense not have inherent incentive flaws that privatizing most entitlement programs do not? There sure aren't many Keynesian economists who think we should privatize military spending. In fact, most economists agree that the federal government's role should at least include providing military defense, ensuring solid infrastructure for security purposes - not necessarily paying for all of it, providing for a federal judicial system, and regulations dealing with economic externalities.

Your second point is a sad note, and I do hope and pray that congress comes to reality with the Bush tax cuts, but Obama has a major role if not the most important role in influencing congresses decision and getting legislation passed. The Bush tax cuts are nothing but detrimental to our economy, and if anything are encouraging more greed and corporations sending more jobs over seas.

All Military troops will be out by August, other non-military forces will remain and unfortunately some contractors.. but that is another story. It is long overdue to leave Iraq.

Surely you aren't suggesting that raising taxes at the moment is good economic policy? If you have clarified your statement somewhere else, please disregard. In addition, please explain how tax cuts send jobs overseas. To the contrary, lower taxes encourage domestic production because lower taxes allow US businesses to be more competitive with foreign producers by reducing costs. This shifts the supply curve to the right and increases economic output in nearly the EXACT same manner as government spending - which shifts the demand curve to the right.

With hope that we will recover because Keynes theories are correct. I will admit that there was too much pork in the bill, even Obama will agree to that, but it was needed, Keynes would tell you that.

First, we will not recover because Keynes theories were correct. Keynes never said that, in all cases, reductions in taxes and increases in spending were required to pull an economy out of a recession. Certainly, you do not believe that as many economies - ours included - have recovered from horrible recessions without the type of action advocated by Keynes. Keynes theories simply assert that these actions may be required in some cases and, in others, can be implemented to more swiftly recover from economic downturns.

Second, a blanket assertion that Keynes would agree to spending for spending's sake is misplaced. Keynes believed in very targeted spending aimed at shifting the demand curve to the right. To do this, spending must be focused in areas where demand can be increased the most. Much of the pork in the stimulus bill was added without regard to its ultimate effect on the economy. Something Keynes would not likely have placed his stamp of approval.

To quote PK on the 1970s

One argument you often hear from anti-Keynesians — it pops up in comments here — is that the experience of stagflation in the 1970s proved Keynesian wrong. It didn’t; what it did disprove was the naive Phillips curve, which said that there’s a stable tradeoff between unemployment and inflation. By the end of the 70s most macroeconomists had accepted some version of the Friedman/Phelps natural rate hypothesis, which says that sustained inflation gets built into price-setting, so that inflation can persist for a while even in the face of high unemployment. But that’s very far from rejecting the basic Keynesian insight that demand matters.

I am certainly not implying that Keynes' theories are patently incorrect. The purpose of this tread appears to be regarding the optimal size of the federal government. In downturns, Keynes theories support an increase in governemnt spending and a decrease in taxes. This in no way can be used as a blanket assertion that Keynes supports large government. To the contrary, the stimulating ability of governments are reduced by long-term increases in spending.

WWJMKD? With a twist of WWPKD added in.

Friedman/Hayek/Laffer/etc. would be running Herbert Hoover 2.0.

I haven't found him to be wrong yet, the beauty of it all is the simplicity.

I really value your insight on topic, as you seem like a very bright kid. Please do not risk putting the legiitimacy of your argument in doubt by putting forth misleading information as if it were fact. Friedman/Hayek and other free-market economists are not "Herbert Hoover 2.0." To Keynesians and free-market economists, taxes are naturally inefficient because they create a deadweight loss to society. Moreover, they work to shift the supply curve to the left - artificially raising prices and reducing supply. Hoover RAISED TAXES in the middle of the depression - something no economist would support as strong economic policy.

 

[OrangeEmpire]

I am young yes, a senior in high school, if that still qualifies as young, but that doesn't stop me from believing in the Keynesian theories. Raw idealism is what this country needs more of.

Ah, this explains every thing!

You have no idea what the real world is like.

You still have hope.

k:

 

[OrangeEmpire]

No never never never

I responded..... the angency I work for was run into the ground over the past 20 years due to awful higher level administrators. I mean, it shouldn't have taken 20 years to figure out elimination of retirement jobs for politicians. As soon as you let politicians in, you are screwed.

 

[TennTradition]

Not to run to his defense, but I read it as droski just taking a swipe at OE.

Ahh...that works I guess...didn't make the connection since OE doesn't work for the feds.

 

[OrangeEmpire]

I thought about Secret Service..... but I don't like democrats that much.

 

[OrangeYankee]

I responded..... the angency I work for was run into the ground over the past 20 years due to awful higher level administrators. I mean, it shouldn't have taken 20 years to figure out elimination of retirement jobs for politicians. As soon as you let politicians in, you are screwed.

This here is why I think every government service/agency really sucks right now. Education is another prime example. It's not so much the teachers, who take the brunt of the blame, it is the dumbass chiefs who are running the show that really need to go.

At the end of the day, my argument is not based on economics (just kind of works out that way in the end.) It's the fact that the government as an entity, no matter how good the intentions seem, can not wipe their own butt without 15 hands. It's grossly inefficient, set up totally wrong, and just flat out incompetent in their delivery of said service. You invest 12% of your income using traditional investment plans over the years, and I guarantee you that you will pull in a MUCH larger income in the end than what Social Security will EVER even dream of giving. There's another example. Face it, while I admire your desire to help those in need, sending them government programs and services is akin to just shooting them really.

 

[OrangeEmpire]

In the infinite wisdom of state democratic leadership, they opened up our agency to "civilians" at senior leadership positions. This means every level from Lt. up. All this amounted too was retirement positions for politicians that had no clue about any thing in the world.

 

[bam15]

Obama doesn't need to listen to Krugman. He has plenty of people as well or better qualified telling him exactly what Krugman would.

Sorry, I had to sleep. So I've missed the argument. opcorn: Love having snow days.

To answer your questions: He, he has wrote more then one paper, a nobel prize in economics, two excellent books, excellent articles. But as I said I just like Krugman more then Bernanke.

He couldn't have done much more differently regarding monetary policy, Bernanke is following Keynes to the book by lowering interest rates.

Right now the economy is operating below capacity due to insufficient demand, that is a given. The cost of that insufficient demand is is very damaging: dollars of wasted output, severe social and psychological damage to the unemployed.

If they purchased long term assets it would push down interest rates at longer maturities. Thus dampening the spread between rates. Inflation, is expected to remain consistently below the Fed’s target.

Romer, Bernanke, etc. aren't idiots, I know that. They extremely knowledgeable economists, I just happen to prefer PK. :good!:

 

[bam15]

Here's the summary:

I really like Keynes. His ideas are great in part because they are so simple. He's never been wrong. His critics are wrong because whenever Keynesian theory doesn't match reality it's because real Keynesian theory wasn't used (by corollary - when an administration uses deficit spending in a recession and the economy gets better it is because they are using real Keynesian theory).

I really like Paul Krugman (who really likes Keynes). Things would be way better if he ran the Fed - somehow.

Every bit of spending done by Obama is him trying to implement Keynesian economics. When (if) he cuts spending or raises taxes it is not him violating Keynesian policies; rather it is him realizing the recession is over and as a result he actually IS furthering the use of Keynesian policies.

Any deficit spending is Keynesian and not a sign of fiscal irresponsibility.

The only way to avoid deficit spending is to reduce military spending. Interest payments on debt and entitlements are not a problem.

I heart JMK and PK

I don't think he has been wrong, apparently others do though . Sure, I think Obama hasn't been aggressive enough in battling the recession, he should of had a larger stimulus. Keynes always has an answer for Recessions k:.

Paul Krugman likes Keynes more then I do, but I do believe that PK would be an excellent Fed chair. Try reading The Return of Depression Economics, and Conscience of a Liberal.. great books. Just so you know.. I like Robert Reich, Joseph Stiglitz

Nope, George W Bush is a great example. His tax cut enlarged the deficit without stimulating the economy and even worsening income distribution in the US. He didn't lower interest rates enough, and should have spent more infrastructure, and unemployment benefits, since these would of had larger stimulus effect, and would only be a temporary deficit, unlike the bush tax cuts which are still factoring in today.

That is one way. Military spending is a big glaring hole right now though. And we should have never been in Iraq in the first play.

Yes, I do heart JMK and PK. But I want to major in Political Science not Economics. However, I like economics, especially JMK!

 

[bam15]

you left out Reagan the Keynesian military spender.

Was Keynes even in the military?

Well he was, a Keynesian military spender, there was a recession going on in the early 1980's, he cut taxes, and spent a lot of cash on combating the Soviet Union.

If the civil service qualifies?

 

[bam15]

jesus cut and paste, cut and paste. have any ideas of your own?

Yes I do, but as I said I was quoting Paul Krugman who knows more about Economics then I will ever dream of.

 

[bam15]

Ah, this explains every thing!

You have no idea what the real world is like.

You still have hope.

k:

I can't apply The General Theory of Employment, Interest and Money to the real world? hmy: NOOOOOOOOOOOOOOOO.

 

[bam15]

But you seem to suggest in earlier posts that we should not cut them EVER and that, post-recession, to get federal spending back in check the solution should be to reduce military funding. I suppose, at least so it seems, that we have a fundamental disagreement as to the role of the federal government. Because citizens are better able to maximize utility by making their own spending decisions on a micro level, the reduced incentives of government bodies to operate in the most cost-effective and effecient manner, and because the problem of deadweight loss when paying for government programs - I tend to have an "only what is necessary" approach to the role of the federal government. What makes entitlement spending better suited for our federal government than military spending? Does priviatizing military defense not have inherent incentive flaws that privatizing most entitlement programs do not? There sure aren't many Keynesian economists who think we should privatize military spending. In fact, most economists agree that the federal government's role should at least include providing military defense, ensuring solid infrastructure for security purposes - not necessarily paying for all of it, providing for a federal judicial system, and regulations dealing with economic externalities.



Surely you aren't suggesting that raising taxes at the moment is good economic policy? If you have clarified your statement somewhere else, please disregard. In addition, please explain how tax cuts send jobs overseas. To the contrary, lower taxes encourage domestic production because lower taxes allow US businesses to be more competitive with foreign producers by reducing costs. This shifts the supply curve to the right and increases economic output in nearly the EXACT same manner as government spending - which shifts the demand curve to the right.



First, we will not recover because Keynes theories were correct. Keynes never said that, in all cases, reductions in taxes and increases in spending were required to pull an economy out of a recession. Certainly, you do not believe that as many economies - ours included - have recovered from horrible recessions without the type of action advocated by Keynes. Keynes theories simply assert that these actions may be required in some cases and, in others, can be implemented to more swiftly recover from economic downturns.

Second, a blanket assertion that Keynes would agree to spending for spending's sake is misplaced. Keynes believed in very targeted spending aimed at shifting the demand curve to the right. To do this, spending must be focused in areas where demand can be increased the most. Much of the pork in the stimulus bill was added without regard to its ultimate effect on the economy. Something Keynes would not likely have placed his stamp of approval.



I am certainly not implying that Keynes' theories are patently incorrect. The purpose of this tread appears to be regarding the optimal size of the federal government. In downturns, Keynes theories support an increase in governemnt spending and a decrease in taxes. This in no way can be used as a blanket assertion that Keynes supports large government. To the contrary, the stimulating ability of governments are reduced by long-term increases in spending.



I really value your insight on topic, as you seem like a very bright kid. Please do not risk putting the legiitimacy of your argument in doubt by putting forth misleading information as if it were fact. Friedman/Hayek and other free-market economists are not "Herbert Hoover 2.0." To Keynesians and free-market economists, taxes are naturally inefficient because they create a deadweight loss to society. Moreover, they work to shift the supply curve to the left - artificially raising prices and reducing supply. Hoover RAISED TAXES in the middle of the depression - something no economist would support as strong economic policy.

Thanks for the long reply, you seem to know economics very well.

Yes, I did imply not to cut entitlement programs, I was replying to volinbham, who suggested that military spending was more important then entitlement programs, which I believe it is not. Yes, it does appear that we have a difference of opinion, but I believe entitlement programs are essential. You can have a large domestic agenda, which I support, while still maintaining an adequate federal budget and I believe PAYGO will be a step in the right direction once the Recession has subsided. However, I am open to mandatory Welfare drug-testing, and Welfare to Work. I didn't say the Military wasn't essential and as you said economists agree with the United State's military role regarding Military funding. The military is essential.. but we could without a doubt get by with cutting 25% of the DOD budget, for goodness sake no military budget in the world compares to ours. Infrastructure, unemployment benefits, and tax relief are more important in this stage then military spending.

Raising taxes on the top one percent won't impact the economy to the extent that Obama's tax cuts for the lower class will. Obama's taxes will be lower for average Americans. That said, when these taxes go into effect [2011-12]? most of the Recession will have subsided. We were rewarding businesses that sent job's over seas with tax cuts, that is unacceptable, not in this global economy.

I'm confused by this.. not all cases, but I find it to be true most of the time, even in Nazi Germany. I have yet to find Keynes theories to be wrong, updated over time by Neo/New/Post etc. that I may not always agree with. Keynes ideas worked after the damn, 1970s recession - Military Keynesianism, and even now, with a combination of other factors.

Correct, he doesn't agree with spending for spending's sake. But this was a essential bill, if it was not passed as soon it was the crisis could have been worse, that said it should have been larger, as we are seeing the need for another stimulus.

I'm not advocating long-term increases in spending, but cutting essential programs could have undesireable consequences, but that is where me and you differ in terms of essential programs. I certainly don't think full fledged devolution works, but this is differences in economic philosophy and how the government works that goes dates back to the founding of this great nation. I just couldn't see how JMK would be in favor of income distribution gaps, and I believe that narrowing the income gap, lifts the working class out of poverty and makes the economy boom. I also see Health care as a right not a privilege.

They would essentially propose a complete laisezz-faire society that Hoover initially embraced with little to no regulations, which proved inefficient and is what I mean by" Herbert Hoover 2.0" and he also made the dumb move of raising taxes in the middle of a recession which you mentioned, something Keynes would have told him not to do. That said many propose trimming the budget today [Conservatives] with no real answers, they don't want to leave Iraq or Afghanistan, but want to cut programs that are vital to the nation. Social/Domestic programs are much more vital to the success of our economy then the Military, that said the Military is also important, but not to the extent where cuts cannot be made.

Thanks for the kind comments.

 

[OrangeEmpire]

I can't apply The General Theory of Employment, Interest and Money to the real world? hmy: NOOOOOOOOOOOOOOOO.

Simply put, no, all you have our textbooks and graphs.

Not how the real world works.

You'll find this out in about 6-10 years.

 

[volinbham]

Yes, I did imply not to cut entitlement programs, I was replying to volinbham, who suggested that military spending was more important then entitlement programs, which I believe it is not.

I did not suggest that at all.

 

[paul1454]

They would essentially propose a complete laisezz-faire society that Hoover initially embraced with little to no regulations, which proved inefficient and is what I mean by" Herbert Hoover 2.0" and he also made the dumb move of raising taxes in the middle of a recession which you mentioned, something Keynes would have told him not to do. That said many propose trimming the budget today [Conservatives] with no real answers, they don't want to leave Iraq or Afghanistan, but want to cut programs that are vital to the nation. Social/Domestic programs are much more vital to the success of our economy then the Military, that said the Military is also important, but not to the extent where cuts cannot be made.

Thanks for the kind comments.

No problem. I enjoy the debate.

One correction to your above post is that Friedman did not patently oppose regulation. To the contrary, he was very much in favor of regulation of market inefficiencies (i.e., externalities). However, his regulatory scheme was less of a "goverment sets the standards" type of regulation, and more of a "let's tax the externalities and make them expensive, so they are factored into the equation - rather than blindly imposed on third parties." A lot of people do not know this, and attack free-market economists such as Friedmen for their condemnation of regulation - so I don't fault you for it. They simply believed that regulating should only be imposed to attack inefficiencies, and that government regulation should only incentivize efficient activity - not make feeble attempts to define and enforce it.

 

[TennTradition]

I hate 3-D pie charts that don't give you the actual percentages (e.g., the one above). Most 3-D software will render the chart area-true, as opposed to angle true - so the pieces in the back are actually smaller than your eye makes them out to be (because your brain corrects for the fact that they are further away in the image). That's shoddy craftsmanship.

Carry on.

 

[volinbham]

I like pie

 

[volinbham]

What is the Keynesian's answer to the Warren Harding approach for the 1920 recession? He implemented the basic opposite of keynes and the recession ended quickly followed by rapid economic expansion.

What is the Keynesian's answer to the Japanese situation - slashing interest rates and massive extended government stimulus? I'm guessing the answer I'll get is that they weren't aggressive enough. Hard to prove.

 

[OrangeEmpire]

All jr cares about is spending tax payer dollars on non sense. It makes him feel like he accomplished something.

To say social programs are more important than military is assinine.

Typical military hater until something bad happens then expects the impossible from the our guys and gals in uniform.

Same old crap but a different day.