Clearly you don’t wrench the economy from a deficit to a surplus in one year, so some of the deficits are justified because of that. But few presidents want to create conditions of lower growth, though tolerable. That there is political reasons for running deficits in no way invalidates Keynes’ point.
And given that there are no guaranteed solutions, you need to be flexible enough to change course when the solution you are trying is bombing.
Germany’s austerity was for a specific cause - absorbing the East. It might be viewed as austerity for part of the country and a stimulus package for another part. And it was politically more sustainable, though my daughter who lives in Germany tells me that there are still plenty of West Germans who are pissed off at the East Germans. Contrast that to Spain, where the austerity is caused by a deficit created by bailing out the banks.
The cliff is extreme - moderate cutting and tax increases, especially increases which won’t hurt consumption, are clearly needed.
When you have growth, the deficit can be reduced without intervention. You get more tax revenue, and you don’t need to support the states as much, since they should be running surpluses also. So spending cuts happen automatically. Congress just needs to keep from throwing on more spending programs, which I know is tough. But you don’t need deep cuts to make progress.
Clinton “saved in good times.” GWB continually ran high deficits. Is GWB a “Neo-Keynesian”?
Better yet, can you give a (main-stream) cite for your definition/description of “Neo-Keynesian” ?
But how do we determine that the solution is bombing? We’re dealing in counterfactuals here — we may not see such improvements as we desire, but that doesn’t necessarily imply that other solutions would work better. Nor does it necessarily imply that austerity is a failure; perhaps economic improvement follows an inverted parabolic arc. The time involved has been quite short, and it seems perfectly Keynsian to suspect a period of adjustment.
My knowledge of macroeconomic theory remains dismally unscientific, but I’ve understood neo-Keynesian to refer to a synthesis of Keynesian and neoclassical ideas. Hard to imagine e.g. Paul Samuelson endorsing a definition like “those who don’t believe in saving and instead continually run high deficits”. Sounds a bit like something you’d find on a libertarian punditry site.
He said “during a recovery”. We are in a recovery now, but we are hardly in “good times”.
Anyway, what you appear to be missing is that the government is not some gestalt entity. It’s a bunch of different people with different ideas. Every time we have a surplus, Republicans cut taxes to get rid of it.
It’s not clear that Democrats actually would pay down the deficit if they had sole control of Congress in a time of prosperity, but that’s the plan.
Let me seriously ask you: when you typed out all those years, did you even pause to think when you were typing 2008 and 2009? Was your implicit argument that we have had roughly 60 years of uninterrupted “prosperity” with no economic downturns a point that you actually considered and then typed out, or did you simply not think about this point as you were typing? Because I’m not inclined to do all the heavy lifting of thinking about both my points and yours if you aren’t actually putting any critical thought into what you’re contributing.
I will just leave you with one other question as I await your response: between 1950 and 1980, with those three decades of deficits, do you believe debt as a share of GDP went up a little, went up a lot, went down a little, went down a lot, or pretty much stayed the same? You should let us known your gut instinct before googling the answer.
This is incoherent.
The only way what you’re saying makes sense is if you’re somehow going to next prove that every president who’s run a deficit is a Keynesian. Obviously untrue.
Meanwhile, us ACTUAL Keynesians will happily assert that the budget deficits in the first decade of the 2000s, in the 1980s, etc. were totally unjustified by our economic theory–as you’ll recall, many of us DID argue that, every time another stupid tax cut along with a ghastly expensive military boondoggle was proposed.
I think you’re right. I’m sincerely curious how (or even if) OP will answer my questions.
To answer your first question, yep. And so was Reagan.
“Neo-Keynesian” is a term I just started using for the 21st Century macroeconomists that claim to be Keynesian but only use the part of JMK’s work that says to spend money. These people don’t hold to running a surplus during times of plenty but instead it is continual deficit spending to (over)stimulate the economy. I was not aware that neo-Keynesian meant anything outside my own idiosyncratic usage.
The point I’m trying to make with my questions and all those years is with that we constantly hear that we need deficit spending now because of the recession and that may well be true. But what has been completely ignored are all of the years we have deficit spending while NOT in a recession. I’m trying to point out that the ridiculous spending we have is not because of fighting recessions but because both the Dems and Pubs want to spend money.
And the question also came up about spending vs GDP. The link I provided will pull that up. In another thread I ran the numbers and of course there were fewer years of increased spending measured against GDP than nominal dollars but guess what, an a general rule spending outpaces both GDP growth and inflation so that whole “measure against GDP” doesn’t really hold water.
If 25% unemployment and the best of recent college grads fleeing the country in order to get jobs isn’t bombing, I don’t know what is. Though I guess it depends on what their priorities are. If number one is keeping foreign banks from losing money, I suppose they are doing an okay job.
And I suspect that when the policy was put into place those who pushed for it had a prediction about what the impact would be. And I doubt this was 25% unemployment. I don’t know for sure what was supposed to happen, but from reading Krugman I think they were expecting the “confidence fairy” as he calls it to convince the banks and businesses that the government meant business, leading to a decline in interest rates and growth in the economy. Didn’t quite work out that way, did it? The acceptable interest rates now come from ECB support, not from an assessment that the Spanish economy is healthy.
…because you can’t actually argue logically against Keynesian policy choices, but you wanted to rail about deficits, so you built a strawman?
I can’t complain since I make up my own words also. I usually choose “pseudo-” or “quasi-” as the prefix however, since I think all “isms” have a “Neo-” form already. In the case of Keynesianism, not only is there a Neo-Keynesianism and a New Keynesianism, but, I think, a New Neo-Keynesianism and a Neo-New Keynesianism as well. We’ll have to ask SDMB economists what the difference is between the last two. 
But, regardless of the terminology, can you cite any economist, public figure or Doper that subscribes to the beliefs you ascribe? It’s part of the Starve the Beast ideology, of course, but the aim of that “philosophy” is that an indebted government will eventually need to layoff regulators and IRS auditors, not to “shovel currency in the furnace.”
I’m aware of only one economics expert who advocated unlimited debt. Here are his credentials:
[QUOTE=Dick Cheney - Wikipedia]
He attended Yale University, but by his own account had problems adjusting to the college, and flunked out twice…
In November 1962, at the age of 21, Cheney was convicted of driving while intoxicated (DWI). He was arrested for DWI again the following year.
[/QUOTE]
Here’s his PhD thesis:
[QUOTE=Dick `I only shoot my friends in the face when I’m drunk’ Cheney]
Reagan proved deficits don’t matter.
[/QUOTE]
Of course. He doesn’t understand the issues that well and he tends not to respond to direct questions. Catchy phrases about the Keynesian boogeyman is pretty much the only argument he has.
What question did I not respond to? What issues do I not understand?
Yes we are in a recession and that would indicate a government stimulus to replace the loss aggregate demand. That was proposed by Marriner Eccles during the Depression before Keynes published his work.
Keynes believed that a government should save during good times to have money to stimulate the economy in bad times.
We have run a deficit for 56 of the past 62 years. If policy makers believed in true Keynesian economics this would indicate that we had 56 of 62 years be recession which we all know were not recession times. In response to this, there are those in this thread to point to deficit spending during actual recessions I presume to justify deficit spending in general but I could be wrong. At the very least they dismiss that data that we have a history of deficit spending and say, “But what about THESE 2-3 years where deficit spending is justified?” Therefore my conclusion is that policy makers that call themselves Keynesians are if fact not Keynesians but use that label to justify deficit spending.
While the government is not a household budget (Keynes seems to treat them similarly), continual deficit spending is not sustainable. No one is really sure where the tipping point is. This was discussed in a different thread.
The major difference between Pubs and Dems of today is that Pubs tend to view macroeconomics as Austrians i.e. the aggregate of microeconomic decisions and so increasing aggregate demand is produced by putting money in the hands of consumers through tax breaks. Since Reagan, there is also a contingent of those that belive in increasing aggregate demand through supply-side economics and believe in tax breaks for large producers (so called “job-creators”) and direct spending (name through the defense budget). The Pubs that subscribe to supply-side economics in the name of St. Ronald provide a double hit to the deficit. Dems tend to increase aggregate demand through direct spending in the style of Keynes but without the saving part of his theories.
One point never discussed is if government spending is used to stimulate the economy, then is it a bit circular to compare spending increases to GDP increase? Also, did this recovery show that because the huge amount of spending year in and year out overstimulating the economy, are we at a point where increased spending during a recession provides minimal stimulus? Think of a sputtering car where the gas pedal is almost to the floor already. Pressing the accelerator just a little more (flooring it) doesn’t really help. Is that the state our economy is because that would indicate continual overstimulation of the economy is in a way the antithesis of Keynesian economics.
Long-term government spending has outpaced both inflation and GDP growth. This is the fault of both Democrats and Republicans.
The last politician who supported a rational taxing & spending plan (true Keynesian ideals) was Bill Clinton.
Wasn’t some guy proposing a 2.5 to 1 ratio of spending cuts and tax increases during the last election? I forget his name, but that sounds pretty rational.
Unanswered questions, post 46, for example.
And for what you don’t understand, let’s start with your perception of Keyesianism. You boil it down to this cartoonish one liner of deficits during recessions and surpluses during booms, and then think that many people actually buy into a strict adherence to those maxims as though they were handed down from Moses. There’s virtually nobody who takes Keynes as inerrant gospel in the manner you propose, even Krugman with his fiscal policies isn’t a doctrinaire Keynesian in the manner you prescribe. Plus, there’s the little matter of causation: example, the fact that deficits are routine is more a testament to our system of government and how resistant it is to change, rather than anyone actually advocating that deficits should be run in good times and in bad.
Not to mention your characterization that deficits during the last 62 years is something meaningful, when the debt as a percentage of GDP was halved during the first thirty of those years.
The point YOU are missing is this:
Hamster King said one thing and implied another. He said that government should run deficits during recoveries to pull the country out of recession. The implication is that this is the correct way of doing things, but not always how its done.
What you did was confuse the two and think that what he implied was how it was actually done. You think that he said we should run on deficits during recoveries and as a result, that every year we run on deficits is a recovery. What you should have realized is that Republicans run on deficits even when its not a recovery, because they are fiscally irresponsible.
The premise that we should run deficits during a recovery to pull ourselves out of a recession is a solid and responsible plan. Democrats cannot be responsible if Republicans want to give tax cuts and start wars when we’re in an economic boom. Those times should be when we increase taxes and lower spending, which we would have done as Clinton was able to do that, but Republicans cannot get over their allergy to high taxes for the rich.
What I wish we could do is tie cuts and taxes to economic statistics. If we hit a surplus, then by law taxes go up and spending goes down, but if we’re in a recession, then by law we should spend our way out of it
First of all, read point 5 in post #54. I pointed out that supply-side Republicans are the worst for the deficit because their tax cuts and spending are a double whammy on the deficit so I would say that I’ve already realized the role the Pubs play in the deficit.
Let me back up a bit and explain why I am harping on all of the deficits. First of all, I resent Ravenman for calling my characterization as cartoonish. He misses the point that I was emphesizing a key difference between Keynes’ work and the policies of those that call themselves Keynesians. Keynes treated government spending like a household budget in that you save during good times to spend during bad times. Policy on both sides of the aisle is to have the government provide a significant amount of the aggregate demand of the economy. Some can argue that that is the best way to stimulate the economy - after all government spending is not like household spending - but that theory of economics is NOT what Keynes wrote about so it may be good economic policy or bad economic policy but it is certainly not classical Keynesian policy.
As for the deficits, I have said before that I understand the need for government stimulus during recession but we have had almost continual deficit spending since 1950. I don’t know what data Ravenman is looking at but according to the government itself (Table 1.2), from 1950 to 1970 the deficit was usually 1.1% of GDP or lower with only four years with a deficit higher than that. In 1971 the deficit jumped to 2.1% of GDP falling to 0.4% of GDP in 1974 but and since then it has been below 2% of GDP only three periods: 1979, 1996-2002, 2006-2007. The deficit the last three years has been 10.1%, 9% and 8.7% of GDP (and yes I know people in this thread will now invalidate my entire post because “we have to spend during a recession”) which to put in perspective I’ll point out that during the Depression and implementing Eccles recommendation, the deficit never went over 6% of GDP. Even after the recovery, the deficit is extimated to be 3% of GDP. To answer Ravenman’s question directly, I’m not exactly sure what he meant by “debt as a share of GDP”. The accumulated debt doesn’t seem to make sense in that context so assuming he meant annual deficit, the deficit in 1980 was 2.5X what it was in 1950 as a percentage of GDP.
I don’t get this argument. It’s clear looking at the European crisis that nearly all of the countries implementing austerity are in Shit’s Creek without a paddle. Even the UK has careened into a double-dip recession which is likely due to the spending cuts that the government has implemented. It seems very obvious to me: decreased government spending during an economic downturn is deleterious to the economy. I’d like to hear how decreased government spending and decreased taxes lead to increased economic growth and prosperity. <crickets chirp> Anyone?
Since House Republicans will not pass the middle-class tax cuts that passed the Senate (I’m still scratching my head on this one), I’m willing to endure tax increases that comes along with the fiscal cliff. From what I gather, the fiscal cliff will generate over a trillion dollars for the government. Good, maybe that money can be used to tackle the debt boogeyman that House Republicans have been crowing about like an episode of Scooby Doo.
- Honesty
I haven’t seen any evidence that the people you’re claiming call themselves Keynesians are actually Keynesians.