[PEN-L:1924] RE: Re: a question

["Breen, Nancy (NCI)" <breenn@xxxxxxxxxxxxxxxxxxx>]

Impressive file system, Louis!!  Thanks for your answer to the question.

Nancy Breen, PhD, Economist
Applied Research Branch
Cancer Surveillance Research Program
Division of Cancer Control and Population Studies
National Cancer Institute
301 496 4675


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	Sent:	Friday, January 01, 1999 2:09 PM
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	Subject:	[PEN-L:1923] Re: a question

	Copyright 1984 The New York Times Company

	The New York Times

	July 8, 1984, Sunday, Late City Final Edition

	KEYNES IS BACK, THANKS TO REAGAN

	By Samuel Bowles

	Samuel Bowles is professor of economics at the University of
	Massaschusetts, Amherst, and author, with David Gordon and Thomas
	Weisskopf, of ''Beyond the Waste Land: A Democratic Alternative to
Economic
	Decline.''

	AMHERST, Mass.

	Outside of a handful of economists, hardly anyone took note back in
1972,
	when Richard M. Nixon told the American public, ''We are all Keynesians
	now.'' Some may have wondered what that meant. But most people who knew
	what the economist John Maynard Keynes had come to stand for - an
expanded
	economic role for Government deficits to moderate recessions - probably
	agreed that his Depression-born view of economics had become part of the
	conventional wisdom.

	Among economists, however, the counterrevolution was already well under
	way. Under the banner of monetarism and supply-side economics, business
	groups, right-wing ''think tanks'' and economists were mounting a highly
	successful attack on Keynesian economics. They blamed the expanding role
of
	Government for the slowdown in productivity growth and claimed that
deficit
	spending had done America more harm than good.

	By the end of the 1970's, Keynes was all but dead.

	Then, a miracle happened. Cleverly garbed in a patchwork cloak of
	monetarist and supply-side colors, Ronald Reagan brought Keynes back to
life.

	The most recent Economic Report of the President makes this clear:



	* Under no Democratic President since Franklin Delano Roosevelt during
	World War II has the ratio of Federal Government expenditures to gross
	national product risen as fast as it has under Mr. Reagan.

	* The 1983 Federal deficit set another post-World War II record. Having
put
	his un-Keynesian former chief economic adviser Martin S. Feldstein at
arm's
	length, the President now patiently explains that when the economy
operates
	below capacity, deficits are not all that bad. Ronald Reagan did not
expect
	to find himself in this curious situation. His 1981 supply-side tax cuts
	were supposed to raise after-tax profit rates and thus spark an
investment
	boom. Instead, profit rates remained low for two years after the tax
cut.
	The reason: Profits are not made from idle factories, and a substantial
	portion of the capital stock of the nation still remains unused because
of
	slack demand for output. Keynes would not have been surprised. Despite
an
	investment upturn during the second half of 1983, the President's
Economic
	Report reveals that last year net private nonresidential fixed
investment -
	a common measure of productive investment favored by economists and
	Administration spokesmen alike - fell to 1.5 percent of net national
	product, a post-World War II low. Even if the rosy investment
projections
	recently released by the Commerce Department prove true, 1984 will still
	rival 1983 in this dismal contest, ranking second worst in the post-
World
	War II era, with an investment level less than half what it was the year
	the tax cuts were passed.

	What, then, is fueling the recovery? Where is the expanding demand
coming
	from?

	In part, it is the result of consumer spending made possible by the
virtual
	elimination of savings and through buying on credit.

	But the big boost is from expanded Government spending and from the fact
	that while spending more, the Federal Government is taxing less, thereby
	adding to the total demand for goods and services without reducing the
	levels of private demand.

	The big ticket item in Government expansion is, of course, military
	spending. Thus, today's recovery is a classic example of what has come
to
	be called ''military Keynesianism.''

	But military Keynesianism seems unlikely to reverse our accumulating
	economic difficulties. For one thing, the arrows aimed at Keynesian
	economics from the right were not entirely misplaced. Keynes had taught
	that the management of total demand for goods and services was the main
	objective of Government economic policy. The supply-siders, by contrast,
	pointed to problems not of demand, but of supply, whence their name. By
the
	early 1970's, the Keynesian preoccupation with demand seemed outdated.
	Demand had been booming throughout the 1960's, but the profit rate and
the
	rate of productivity increase had plummeted nonetheless. According to
	supply-siders, the culprit was Government: Taxes and regulation of the
	environment and workplace safety had wrecked the work ethic and tied
	business up in red tape. However, even economists sympathetic to the
	supply-side conclusions have not had an easy time demonstrating the
	concrete importance of their favored culprit in accounting for the
	productivity slowdown, the decline in profits or the investment slump.
And
	the significant cuts in both regulation and business taxes since the
late
	1970's appear to have done little to deal with either problem. But the
	supply-siders are dead right that there is something very wrong with our
	system of production itself. Mounting evidence suggests that a
	deterioration of labor-management relations and a decline in a long-
range
	management thinking and innovation have played a key role in our decade
and
	a half long slide toward economic mediocrity. However, it is not
monetarism
	- Keynes' traditional adversary - that will do his theory in. If
anything,
	it seems President Reagan may have done monetarism in, by unwittingly
	demonstrating that, just as Keynesian economists had insisted, fighting
	inflation through a made-in-Washington recession is an exceptionally
costly
	strategy. The Great Recession of 1979-82 - the longest since the 1930's
-
	seems to have stopped the monetarists' logic in its tracks, since it
	promised that restrictive monetary policy would stop inflation without
	bringing the economy to a halt as well.

	The supply-side economists who shook off the ''voodoo economics'' label
to
	become purveyors of official doctrine for a brief period in the early
days
	of this Administration come closer to having fingered the fatal flaw in
the
	Keynesian approach.

	Yet the Democrats - both in Congress and on the Presidential stump -
seem
	to have made the worst of a very promising situation. For they have
	dismissed the twin truths of the supply-siders: that managing total
demand
	is not enough and that something must be done about the structure of
	production itself. At the same time, they have turned their backs on the
	truth of Keynesian economics: that in a slack economy, with underused
	capacity and large-scale unemployment, a Government deficit will
generally
	stimulate economic growth.

	Richard Nixon should not be surprised. He must know that only he could
have
	gotten away with being the first American President to go to China - and
	only Ronald Reagan could get away with bringing back John Maynard
Keynes.

	Copyright © 1998 LEXIS®-NEXIS®, a division of Reed Elsevier Inc. All
rights
	reserved.


	Louis Proyect
	(http://www.panix.com/~lnp3/marxism.html)