• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

Do you support Keynesian economics?

Do you support Keynesian economics?


  • Total voters
    23
  • Poll closed .
:shrug: certainly so.

but that doesn't justify an inability to account for the failures of the other side of the coin.

Starting in early 2008, both Bush and Obama attempted to "prime the pump" "jumpstart the engine" and a thousand other stupid analogies to suggest that by having the government take money from productive sectors of the economy and funnel it to unproductive sectors, that somehow that would make the economy more efficient and productive and stave off economic pain. Bush ran up the largest deficit in our nations' history, and then Obama more than tripled it.

And what has been the result? Have our historically-proportioned expenditures given us historical success, or historical failure?


chart2.jpg



Winning!

You are ignoring the main aspect of Keynsian economics that was not followed during the Bush years. Running a surplus during the good years

Had the US government instead of running stimulative deficit during periods of economic growth (dependant as they were on the housing bubble), the boom years would have been smaller, the government fiscal situation better. Allowing the government the fiscal room to stimulate the economy during the bad years. Having consumer, corporate and government expanding debt levels during the "boom" years, provides a large temporary stimulative effect on the economy (not true economic growth/wealth creation) but debt finainced consumption). In other the words the government provided stimulus during a period of time it should be contracting its spending, not increasing.

Now in 2011, all sectors of the economy are massively in debt, and have no room to provide stimulus to the economy when it is in a contractionary period (as debt paydowns usually are

One should also note that the US, all of the US has not had such a high total debt level since the 1930's (debt to GDP) which spiked that high due to the economic contraction. Todays high debt levels are not due to economic contraction,


Overall the US has not been following Keynsian economics in full, only the easy part, deficit spending. Ignoring the equally important part, building a surplus. In other words treat government like a business, or a family. Save money for the bad times, in order to ride them out,
 
One should also note that the US, all of the US has not had such a high total debt level since the 1930's (debt to GDP) which spiked that high due to the economic contraction. Todays high debt levels are not due to economic contraction,

Are you talking about personal debt or government debt?
 
So tax cuts don't work? Bush's 2007-2008 was almost entirely tax cuts. Obama's stimulus ws heavily tax cuts. So tax cuts don't work?

tax cuts can work. increased government expenditures do not. tax cuts work best when paired with spending cuts to match.... but our political parties seem to generally lack that kind of spine.
 
Are you talking about personal debt or government debt?

All

US total debt, government, corporate and personal has never been as high as it is now. Only in 1932- or 1933 could it compare before

As such many people are attempting to lower their debt levels either through paying it back or defaulting. The decrease in consumer/personal spending on housing, cars, etc is having a huge effect on the US economy. Consider the drastic decline in new home construction and resale of existing homes, to the huge drop in auto sales from the 17 million mark per year to what I believe was around the 11 million mark last year. Combined they account for a huge drop in consumer spending and economic activity (accounting for multiplier effects and in pure numbers)
 
Last edited:
tax cuts can work. increased government expenditures do not. tax cuts work best when paired with spending cuts to match.... but our political parties seem to generally lack that kind of spine.

The reasons why tax cuts don't necessarily work is because investors can invest their money overseas into cheaper foreign markets. Which is great for foreign economies but not so much for our own.

But there's a way around that. I think a great way to deal with this would be a "human rights tax" on imported goods. If we put a tariff on all goods imported from nations whose labor force is not treated in a way that is on par with that of the U.S. then one of two things will happen.

1) Those nations with incredibly cheap labor will be forced to socially modernize their treatment of their labor force to such a level that the American labor force can compete with them without having to lower American standards for laborers

2) American consumers will be forced to purchase goods only from nations that are curently socially modern with regards to their labor force or focus more on internal manufacturing

Of course, this is going to mean an increase in the price of consumer goods, which means people will be able to buy less crap. But then again maybe having people buy less crap but their money going to decently paid people domestically is better than having people buy more crap and that wealth going overseas to cheap and abused laborers.
 
The reasons why tax cuts don't necessarily work is because investors can invest their money overseas into cheaper foreign markets. Which is great for foreign economies but not so much for our own.

Andrew Mountford (of the University of London) and Harald Uhlig (of the University of Chicago) have used sophisticated statistical techniques that try to capture the complicated relationships among economic variables over time; they conclude that a "deficit-financed tax cut is the best fiscal policy to stimulate the economy." In particular, they report that tax cuts are about four times as potent as increases in government spending.

Perhaps the most compelling research on this subject is a very recent study by my colleagues Alberto Alesina and Silvia Ardagna at Harvard. They used data from the Organization for Economic Cooperation and Development to identify every major fiscal stimulus adopted by the 30 OECD countries between 1970 and 2007. Alesina and Ardagna then separated those plans that were in fact followed by robust economic growth from those that were not, and compared their characteristics. They found that the stimulus packages that appeared to be successful had cut business and income taxes, while those that evidently did not succeed had increased government spending and transfer payments....​


But there's a way around that. I think a great way to deal with this would be a "human rights tax" on imported goods. If we put a tariff on all goods imported from nations whose labor force is not treated in a way that is on par with that of the U.S. then one of two things will happen.

1) Those nations with incredibly cheap labor will be forced to socially modernize their treatment of their labor force to such a level that the American labor force can compete with them without having to lower American standards for laborers

2) American consumers will be forced to purchase goods only from nations that are curently socially modern with regards to their labor force or focus more on internal manufacturing

3. the economy will collapse further as the price of goods spikes - with the poor taking the brunt of the hit. we will start to see large job losses, the market will plunge, and growth will disappear.

trade wars are wars that governments wage on their own people.
 
Goodness Gracious no. The History of that theory is atrocious.



1920: Stock Market Collapse, Unemployment Spikes. Government Response: Cut Spending Reduce Taxes. Effect: Rapid Economic Growth, Unemployment drops to historically low levels.

1930: Stock Market Collapse, Unemployment Spikes. Government Response: Raise Spending Raise Taxes. Effect: Unemployment spikes higher, the economy shrinks for four straight years, a decade of double-digit unemployment. Market does not recover until 1953.

Late 1940's: Extremely High Inflation threatens, as does the loss from the necessary massive restructuring from a war to a peace economy. Government Response: Drastically Slash Government Spending. Effect: Unemployment stays at historically low levels, economic growth accelerates.

WORTH NOTING: this is the single best example of the utter failure of keynesian economics. Keynesians were UNANIMOUS that the reduction in government spending combined with the demobilization of the military would result in mass unemployment. The Government reduced spending by 40%. Millions of men left government service.

and yet 1946 was the single best year for the private economy in United States History. Production shot up a mind-boggling 30%. AG Hines was predicting we would collapse back into the Great Depression - Unemployment predictions from Keynesians across the country ranged between 6 and 10 million men out of work by winter of 1946.... yet unemployment stayed below 4%. Paul Samuelson predicted we would fall behind the Soviet Union (though, to be fair, he kept predicting that. and just stubbornly kept pushing back his "we will fall behind" date as the predicted times came and went and we remained dammably ahead. as late as 1989 he was holding up the Soviet Union as proof that Socialist Command Economies can grow and "thrive").

After the repeated failures of the 1930's (which they blamed on 'greed'), the Keynesians put themselves out into a major falsifiable position on a prediction that - if their assumptions were correct - could not possibly fail..... and were 100% completely utterly humiliatingly hilariously wrong.

Late 1960's: Undaunted by their failure, Keynesians claim that the growth of the 50's and early 60's prove that they have now mastered the business cycle - there will never again need be a recession in the United States of America because they have the power to fine-tune them out via the power of Government expenditures. Arthur Okun (Chairman of the Council of Economic Advisers to the President) wrote an entire book about how recessions were no longer "necessary" and that booms could now be perpetual thanks to the magic of Keynesianism. Result: one month after the book is published, the US goes into recession. Keynesians attempt to bring their brilliance to bear - Result: the 1970s and stagflation. CPI rose about 160% from 1965 to 1980. Unemployment rose and remained high. Inflation-adjusted, the DOW fell fully 80% from it's peak (put that in perspective - the giant market crash that we just went through was smaller).

STAGFLATION: under Keynesianism, of course, is impossible. They had never considered the possibility that it could happen - because their assumptions mean that it can't. Inflation is supposed to improve employment by reducing real wages which remain sticky in inflated dollars, and more money means more growth.... so stagflation can't happen.... and the fact that it does.... well, just ignore the fact that it does, because otherwise the model doesn't work. :)

2001 - Paul Krugman writes about the need to lower interest rates in order to stimulate housing. Bush tells us how we can avoid a recession by jump-starting the economy in 2008. Obama tells us we can keep unemployment below 8% in 2009. Obama tells us that unemployment will peak at around 9% if we don't pas the stimulus.



you know what the definition of "insanity" is? It's doing the same thing over and over and expecting different results.


How can you be against something which you know little about? Keynesian economics is not about government spending; it is concerned about the role of demand within the macro economy.

Lowering taxes to stimulate aggregate demand is in fact quite Keynesian. :2wave:
 
tax cuts can work. increased government expenditures do not. tax cuts work best when paired with spending cuts to match.... but our political parties seem to generally lack that kind of spine.

All the available macro literature speaks differently.

How is Europe faring with austerity?
 
Exactly like lazze-faire economics. ;)

Difference is, lazze faire doesn't require a central authority to prime the pump.
That's the biggest down side of Keynesian economic policy.
They don't stop priming it, for their cronies and themselves.

I'm in favor of positive non intervention, not pure lazze faire.
 
Last edited:
How can you be against something which you know little about? Keynesian economics is not about government spending; it is concerned about the role of demand within the macro economy.

sort of - and I have some quibbles with how they approach demand as well. here, however, I am specifically concerned with the notion that government can somehow magically increase "aggregate demand" and boost the economy by taking money from more productive uses and putting it to less productive uses.

Lowering taxes to stimulate aggregate demand is in fact quite Keynesian

and see that's where we split.
 
sort of - and I have some quibbles with how they approach demand as well. here, however, I am specifically concerned with the notion that government can somehow magically increase "aggregate demand" and boost the economy by taking money from more productive uses and putting it to less productive uses.



and see that's where we split.

I don't see what the disagreement is here. Keynesians recognize the stimulative ability of lowering taxes.
 
All the available macro literature speaks differently.

see post # 32 :)

How is Europe faring with austerity?

last I checked Europe isn't slashing tax rates.

Canada is, however - specifically they're cutting their corporate tax rate. Wonder how Canada is doing.
 
I don't see what the disagreement is here. Keynesians recognize the stimulative ability of lowering taxes.

because they think it increases aggregate demand. demand for them is the precursor position. we support similar positions with very different assumptions about supply and production v demand - and in particular they want deficit-funded tax decreases (which I will agree are much better than deficit-funded spending increases); whereas I would say you need to slash both if you want to optimize your result. I would argue that you don't cut taxes on productive behavior in order to "increase demand", you do it to "increase productive behavior".
 
because they think it increases aggregate demand. demand for them is the precursor position. we support similar positions with very different assumptions about supply and production v demand - and in particular they want deficit-funded tax decreases (which I will agree are much better than deficit-funded spending increases); whereas I would say you need to slash both if you want to optimize your result. I would argue that you don't cut taxes on productive behavior in order to "increase demand", you do it to "increase productive behavior".

yeah okay i agree that's where we split lol.
 
sort of - and I have some quibbles with how they approach demand as well. here, however, I am specifically concerned with the notion that government can somehow magically increase "aggregate demand" and boost the economy by taking money from more productive uses and putting it to less productive uses.

If the uses were so productive in late 2008, early 2009, then why were businesses failing? We witnessed a slew of the largest bankruptcies in history and here you stand making an arbitrary comment about productive uses.

and see that's where we split.

Tax cuts to stimulate demand are Keynesian; if you support such policies then you are in fact supporting Keynesianism.
 
Last edited:
If the uses were so productive in late 2008, early 2009, then why were businesses failing? We witnessed a slew of the largest bankruptcies in history and here you stand making an arbitrary comment about productive uses.



Tax cuts to stimulate demand are Keynesian; if you support such policies then you are in fact supporting Keynesianism.

GB - I think our economic views are pretty similar, but for what it's worth I don't buy the logic in this statement. People support tax cuts for different reasons. Supporting tax cuts doesn't make one a Keynesian, it depends on why.
 
see post # 32 :)

The post where you took Makniw's opinion as your own? I could post a Krugman or Stiglitz opinion piece; but that is hardly credible macro literature.

last I checked Europe isn't slashing tax rates.

Europe cannot slash tax rates because they would be instantly downgraded by the major credit agencies thereby pushing them to default (such downgrades reallocate collateral requirements which turns the scale considerably).

Canada is, however - specifically they're cutting their corporate tax rate. Wonder how Canada is doing.

Canada has been experiencing positive GDP growth for some time, and does not have the massive amount of consumer and government debt hanging over their heads. So yes, they can slash tax rates where as we cannot.
 
GB - I think our economic views are pretty similar, but for what it's worth I don't buy the logic in this statement. People support tax cuts for different reasons. Supporting tax cuts doesn't make one a Keynesian, it depends on why.

If you are supporting Bush style tax cuts to improve the economy, that's Keynesian theory at it's purest. If you are supporting tax cuts to gain political favor, well.... that is something else in it's entirety.

And for the record, i do not support one school of economic thought although i pay close attention to New Keynesians (which are essentially the same as neo-classical supporters) and institutionalism.
 
Last edited:
GB - I think our economic views are pretty similar, but for what it's worth I don't buy the logic in this statement. People support tax cuts for different reasons. Supporting tax cuts doesn't make one a Keynesian, it depends on why.

Tax cuts without corresponding spending cuts for the government quite often have the same stimulative effect as when a government increases spending.

It is the spending over and above what normal incomes would support that is stimulative. Whether the money for the extra savings come from savings or from debt, it is stimulative, it doesnt matter if it is the government or private individuals doing the spending.

As for which is more effective of course is determined by what is done with the extra money put into the economy. Spent on infrustructure, it can provide both a short term and a long term boost to the economy, spent on foreign non durable goods, it will have less of an effect on that countries economy, put into a savings account or used to pay down debt, it will have no effect on the short term economic activity
 
put into a savings account or used to pay down debt, it will have no effect on the short term economic activity

Some always fail to understand this part.
 
Tax cuts without corresponding spending cuts for the government quite often have the same stimulative effect as when a government increases spending.

It is the spending over and above what normal incomes would support that is stimulative. Whether the money for the extra savings come from savings or from debt, it is stimulative, it doesnt matter if it is the government or private individuals doing the spending.

As for which is more effective of course is determined by what is done with the extra money put into the economy. Spent on infrustructure, it can provide both a short term and a long term boost to the economy, spent on foreign non durable goods, it will have less of an effect on that countries economy, put into a savings account or used to pay down debt, it will have no effect on the short term economic activity

100% agree.
 
The post where you took Makniw's opinion as your own?

no, where I linked to him citing two pieces of literature that give the lie to your claim.

Europe cannot slash tax rates because they would be instantly downgraded by the major credit agencies thereby pushing them to default (such downgrades reallocate collateral requirements which turns the scale considerably).

well that's on the credit agencies then. Static Scoring will be the doom of us yet :).

Canada has been experiencing positive GDP growth for some time, and does not have the massive amount of consumer and government debt hanging over their heads. So yes, they can slash tax rates where as we cannot.

canada collects a larger percentage of her revenue from corporate taxes than we do, with a tax rate that is less than half of ours.

again, revenue is not as much a function of rates as it is a function of growth and GDP.
 
Tax cuts without corresponding spending cuts for the government quite often have the same stimulative effect as when a government increases spending.

no, they have a greater effect, because it matters who is doing the spending. economic decisions made by producers and consumers looking for the best return/product for the lowest price tend to make better economic decisions than those that are made by congresscritters seeking reelection.

It is the spending over and above what normal incomes would support that is stimulative. Whether the money for the extra savings come from savings or from debt, it is stimulative, it doesnt matter if it is the government or private individuals doing the spending

okay. when government spends money that it gets through debt - where did that money come from?

As for which is more effective of course is determined by what is done with the extra money put into the economy. Spent on infrustructure, it can provide both a short term and a long term boost to the economy, spent on foreign non durable goods, it will have less of an effect on that countries economy, put into a savings account or used to pay down debt, it will have no effect on the short term economic activity

and again, Goldenboy's literature, indicates that:

....Indebtedness also matters: when the outstanding debt of the central government exceeds 60 percent of GDP, the fiscal multiplier is not statistically different from zero on impact and it is negative in the long run. Thus, the 60-percent-of-GDP threshold is a critical value above which fiscal stimulus may have a negative, rather than a positive impact on output....
 
Back
Top Bottom