Re: Keynesian State of the Union

[pdavidso <pdavidso@xxxxxxx>]

>===== Original Message From Clifford Poirot <cpoirot@xxxxxxxxxxx> =====
>Or what. He is a supply sider. There is some similarity between supply
>siders and Keynesians on deficits, but this is superficial.
>
>A Keynesian strategy would focus on deliberate incurring of deficits to aid
>the states with their fiscal problems, while providing targeted tax relief
>for lower and middle income families. Though some on this forum would
>disagree, I would also argue that a Keynesian strategy would never have
>"accidentally" incurred a deficit by large tax cuts at a time when the
>budget was only precariously balanced. A Keynesian strategy would be short
>term, with the deficit designed to disappear when the economy returned to
>full employment.

This assumes that with a balanced budget, private aggregate demand is
sufficient when added to government demand (government spending equal to tax
revenue) to generate a full employment effective demand.  Keynes, in the GT
did not think that this was very likely. Thus Keynes conceived of the
possibility of a "somewhat comprehensive socialization of investment will
PROVE THE ONLY MEANS OD SECURING AN APPROXIMATION TO FULL EMPLOYMENT" [gt, P.
378].



>An interesting side note to all this is a brief article in today's WSJ on
>Bush's new economic advisors, including deficit hawk Greg Mankiw. Bush's
>policies are the direct opposite of what one would propose upon a reading of
>Mankiw's text (I'll leave aside the issue of whether that is good or bad).
>Mankiw's view of deficits is pretty much regarded by supply siders with
>derision, who view Mankiw's quasi-New Keynesian, quasi New classical
>synthesis as mere justification for tax and spend policies. I doubt this
>signals a change in policy direction for Bush. I wonder if Mankiw will now
>revise his textbook.

No way.  But the lure to be in the corridors of power induces people to say
the strangest things. Mankiw in an article on the resurrection of Keynesianism
-- argues that the GT is confused book not wirthy of reading -- and the long
run is the only important role for policy.  So much for Mankiw as a Keynesian.

Paul

Paul

Paul Davidson
Editor, Journal of Post Keynesian Economics
University of Tennessee
SMC 503
Knoxville, Tennessee 37996-0550
phone # (561)369-1951; fax #(561)369-1951;
email pdavidson@xxxxxxx
http://econ.bus.utk.edu/davidsonextra/Davidson.html