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Melaschasm (88.50)

Keynesian economists, where art thou?

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10

June 09, 2011 – Comments (21)

During the recession many people declared their support for Keynesian economic policy, and demanded a big spending stimulus.  After trillions of dollars of extra spending, the recession is over.

Now Keynesian economics requires spending cuts.  That Obama, democrats and many republican politicians have abandoned their recently held economic principles is not surprising.  That many CAPS bloggers have is disappointing to me. 

Why aren’t the Keynesians on CAPS demanding spending cuts?

21 Comments – Post Your Own

#1) On June 09, 2011 at 2:04 PM, chk999 (99.98) wrote:

People seem to have never actually read Keynes and so missed the part where he talks about the gov saving and paying down debt during good times so that there was financial firepower available during bad times.

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#2) On June 09, 2011 at 2:14 PM, buffalonate (96.77) wrote:

I believe in Keynesian economics and you are absolutely right.  Stimulus spending is only worth it when the economy is in a severe downturn.  At some point you when the economy is clearly recovering you have to wean yourself off the deficits.  In a perfect world we would have no debt and then when a severe recession came you could run big deficits for several years to stimulate the economy and not worry about the deficit. 

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#3) On June 09, 2011 at 2:26 PM, ajm101 (33.74) wrote:

Ok - first of all, you have a glaring and obvious mistake that even a non-economist should know:  Keyensian economics does not "require spending cuts" after a successful stimulus, it requires the government run a budget surplus.  So if taxes are historically and comparitively low vs other developed countries, then raising taxes will accomplish the same thing by increasing revenue.

Now I, not being a trained economist, don't know what Keynesian economists regard as the criteria for transitioning from deficit to surplus, so I don't know if now is the appropriate time for this policy change.  Is it just the boundary between recession and growth?  Is it employment levels?  Is it utilization? Since you seem so knowledgable on th subject, maybe you could share what the correct answer is.

But yes, I completely agree, when times are good the government should run a budget surplus and repay debts from the previous stimulation cycle.

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#4) On June 09, 2011 at 3:08 PM, Melaschasm (88.50) wrote:

#2  How fast do you recomend cutting spending?

#3  Since we primarily used spending stimulus during the recession (as Keynes recommends), we should primarily use spending cuts to reverse the stimulus.

Many keynesian's are already claiming that the Bush tax cuts should be allowed expire (Keynes would agree), there is no disconnect between theory and policy.  

There is some grey area regarding the timing of spending cuts.  I could see the 2012 budget spending slightly less than 2011.  2013 should have spending cuts to bring the US closer to what it spent in 2009.  2014 should have lower spending than 2009.

All of this assumes we do not have a severe double dip.  If we have a severe double dip, Keynes would recommend a big emergency spending stimulus once a severe recession arrives. 

 

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#5) On June 09, 2011 at 4:21 PM, Betapeg (< 20) wrote:

I'm a Keynesian and I agree on the spending cuts. But it's not our fault the government isn't following it's own self-described Keynesian economics. So many expenditures need to be reformed too but that won't happen either. We're stuck with a bloated inefficient government with little hope of improving it due to partisan infighting.

China, unfortunately for us, does not have this problem. 

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#6) On June 09, 2011 at 4:53 PM, AvianFlu (49.78) wrote:

Beta:

You refer to a bloated inefficient government. Is there any other kind?

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#7) On June 09, 2011 at 4:54 PM, L0RDZ (74.84) wrote:

Want real change  vote  or march for less gov  ment.

Who has more money than it needs ?  gov ment.

Who is tweeting pics of what looks like private parts ?  People elected in Gov ment !   Ironically named  REP  WEINER...   lol....   this is too funny if these fools werent responsible for  spending so much $$$$$$$$$$$$$

 

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#8) On June 09, 2011 at 5:30 PM, PeteysTired (< 20) wrote:

Melaschasm

It appears your request for cuts have not been answered in this blog or in your other posts in other blogs.  The left wants nothing to do with cuts....I am shocked they haven't talked about a cut in military spending..this floors me.  I guess a constituency comes in all stripes :)

IMHO, taxing the rich just won't make up the difference.  If people really feel that debt and deficits are a burden on our prosperity then something has to be cut?  Doesn't it?

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#9) On June 09, 2011 at 5:56 PM, MegaEurope (22.54) wrote:

Now Keynesian economics requires spending cuts. That Obama, democrats and many republican politicians have abandoned their recently held economic principles is not surprising. That many CAPS bloggers have is disappointing to me.

What an excellent argument. Anyone in favor of deficit spending during a recession is hereby a Keynesian and must therefore agree with every word J. M. Keynes ever uttered.

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#10) On June 09, 2011 at 8:05 PM, ajm101 (33.74) wrote:

Hey Petey -

Republicans need to man up.  If they want to cut Medicare, by all means run on it.  It's a democracy, and the reason all this 'What are Democrat's going to cut to prove they're serious' garbage is going around is because Republicans know they can't win on it and they have the Ryan plan votes on record.  Democrats would have to be a bunch of idiots to anything except ignore it and laugh in private - and since they're a bunch of idiots I fully except that they'll propose a well research spending cut that Republicans will turn around and use to hang them at the ballot boxes in November.

Not that it matters.  David is right, the ruling class controls both parties for the most part and in the end it doesn't matter.

But as long as you're going to live in the partisan fever swamps, at least man up and say, "I WANT CUTS" instead of this passive agressive BS.

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#11) On June 09, 2011 at 9:12 PM, Betapeg (< 20) wrote:

AvianFlu, I'm sure if you look around the world, you'll find governments which, while never perfect, function far better than ours. Belguim has an excellent education system. The Chinese government has overseen probably the largest economic expansion in the history of the world. And there are others. Surely, we can learn some things. 

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#12) On June 09, 2011 at 9:29 PM, ChrisGraley (31.54) wrote:

 8:05 PM, ajm101 (78.07) wrote:

Republicans need to man up.  If they want to cut Medicare, by all means run on it.

I totally agree!

And then maybe Democrats would man up and admit that they want to raise taxes on everyone and have government provide all their needs with the efficiency of the former USSR.

Once people realize how stupid it would be to vote for either platform, we can finally look toward progress in this country.  

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#13) On June 09, 2011 at 9:52 PM, ajm101 (33.74) wrote:

@ChrisGraley -

Republicans are worse than Democrats right now, so I support Democrats.  What's your answer if neither?  Libertarians?  The Brainy Smurf of the political spectrum?

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#14) On June 10, 2011 at 8:06 AM, ChrisGraley (31.54) wrote:

@ajm101

So you support being stabbed in the back over being shot in the back. Maybe it might be time to at least consider option #3.

The definition of stupid is trying the same thing over and over again and expecting different results.

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#15) On June 10, 2011 at 8:51 AM, ajm101 (33.74) wrote:

@ChrisGraley

I believe in rational game play.

I also reject your false equivalency. 

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#16) On June 10, 2011 at 9:10 AM, Lefthander13 (< 20) wrote:

If some of you would like to see Maynard Keynes' work portrayed in a historic context you should read 'Lords of Finance' authored by Liaquat Ahmed...the story of how the worlds four central bankers (America, England, France and Germany) led the post WWI world into depression...Keynes' work wasn't so influential back then...

As to the issue of running a surplus...the stimulus was supposed to create sufficient economic growth that the increased tax BASE would grow us into a surplus...the guys in Washington are just 'raiding the treasury'...

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#17) On June 10, 2011 at 10:44 AM, ChrisGraley (31.54) wrote:

@ajm101

I believe in rational game play.

So you'll try the same thing over again and expect a different result.

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#18) On June 10, 2011 at 11:27 AM, ajm101 (33.74) wrote:

Did you miss the false equivalency part?  Anyway, it's been fun, but this thread is past it's use by date.

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#19) On June 10, 2011 at 12:53 PM, chk999 (99.98) wrote:

I completely concur with Lefhander13's recommendation of "Lords of Finance". That book is truly excellent and should be read by everyone interested in money, banking and fiscal policy.

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#20) On June 10, 2011 at 5:00 PM, ChrisGraley (31.54) wrote:

Sorry that this didn't help you make a choice that wasn't the lessor of 2 evils ajm101.

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#21) On June 10, 2011 at 8:01 PM, Melaschasm (88.50) wrote:

#9  Not everyone who supports increased government spending is a keynesian.  A few popular examples of groups who supported increased spending during a recession:

Keynesians, marxists, communists, socialists, and monetarists (depending upon how you define spending).

Back when TARP 1 & 2 and especially the stimulus package were being debated, many politicians were refering to keynes and his policy recommendations.  The reason the stimulus package is usually refered to as the stimulus package is because the politicians were claiming that it was a keynesian stimulus package.  While there was some supply side tax cuts in the package, the majority of the deal was spending.

Some of these arguements can also be made about supply siders, and I plan to discuss that next week.

I appreciate all of the comments.

Have a great weekend everyone.  

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