Re: Stiglitz on central banks

[Brad DeLong <delong@xxxxxxxxxxxxxxxxx>]

> Ian Murray wrote:
>
> > Is acceptance of the crowding out argument a litmus test for econowonks in
> > DC now?
>
> Maybe, but Stiggy lives on the Upper West Side of Manhattan. I think
> he's motivated more by partisanship - Dems good, Reps bad. Dems
> raised taxes in '93, Reps cut taxes in 2001, 2002, and 2003.
>
> Doug


No. Liberal Keynesians buy the "crowding out" argument under two sets
of circumstances: (i) if the economy is at full employment, and (ii)
if the central bank has a target unemployment rate, and responds to
plans for fiscal stimulus by raising interest rates enough to
neutralize the effects of fiscal policy.

But today neither of those apply. And even this card-carrying
neoliberal Keyensian wants a bigger deficit for the next 24 months.
(But budget surpluses four or more years out.)


Brad DeLong