Re: The Politics of Recession

[Sven R Larson <larson@xxxxxx>]

Clifford Poirot wrote:
>
>
> Note: I am **NOT** arguing that all government debt crowds out and I am not
> arguing against all government debt. My argument is against tax policies
> that are poorly thought out and recklessly implemented and lead us back to
> high structural deficits, and even possibly, BOP disequilibrium.
>

Exactly what is a structural deficit? The deficit that persists at full
employment? Then what is full employment? General equilibrium deficit?
Then what is Gen Eq?

You're probably right that an interest rate cut would do more
immediately for the economy, but I still think tax cuts are important to
help lifting the economy out of a recession. A few hundred dollars extra
per year for a family with kids may be enough to stave off reduced
spending and, combined with lower interest rates, motivate "business as
usual". Once the industry realizes things are not going to be that bad
after all in this recession lay-offs will be dampened or halted. But, of
course, there's a lot of psychology in this.

All in all, from a Keynesian perspective it's better to have a
deficit-prone republican i the White House than a fiscally prudent
democrat.

/srl

--
Sven R Larson
PhD; Assistant professor of economics
Department of Social Sciences, Bldg. 22.2
Roskilde University
Pb 260
DK-4000 Roskilde, Denmark
Phone: (+45) 4674 2910