Post by AztecWilliam on Dec 19, 2011 10:40:59 GMT -8
Currently, there is much talk about whether a new government stimulus is needed to rescue our weakened economy. Those who still have faith in the Keynesian economic theory say "Yes." But what would Keynes himself say today, considering the very different economic situation of today's world? Samuelson, who favored the 2009 stimulus, makes several points on the subject, with an emphasis on the role of the bond market. Here are a couple of important quotes from this piece. . .
Suppose a new stimulus -- beyond renewal of the payroll tax cut -- did succeed at significant job creation. By piling up more debt, it would still risk aggravating a larger crisis later.
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Governments have ceded power to bond markets by decades of shortsighted behavior. The political bias is to favor short-term stimulus (by lowering taxes and raising spending), which is popular, and to ignore long-term deficits (by cutting spending and raising taxes), which is unpopular. Debt has risen to hazardous levels, undermining Keynesian economics as taught in standard texts.
www.realclearpolitics.com/articles/2011/12/19/bye-bye_keynes__112448.html
AzWm
Suppose a new stimulus -- beyond renewal of the payroll tax cut -- did succeed at significant job creation. By piling up more debt, it would still risk aggravating a larger crisis later.
- - - - - - - - - - - - - - - - -
Governments have ceded power to bond markets by decades of shortsighted behavior. The political bias is to favor short-term stimulus (by lowering taxes and raising spending), which is popular, and to ignore long-term deficits (by cutting spending and raising taxes), which is unpopular. Debt has risen to hazardous levels, undermining Keynesian economics as taught in standard texts.
www.realclearpolitics.com/articles/2011/12/19/bye-bye_keynes__112448.html
AzWm