Sandwichman wrote:
> Jim Devine asked, "what's wrong with the 'stimulus package'?"
>
> I begin by rejectiing your premise, Jim, that it "involves Keynesian
> fiscal stimulus... [and] creates jobs and income through the
> multiplier effect" First, it's not "Keynesian" and, second, it doesn't
> "create jobs". Of course that reverses the order of importance of the
> two aspects. And, frankly, if it worked, I wouldn't care if it was
> Keynesian or not. It just won't work.
Since Keynes wasn't infallible, not being Keynesian could very well be
a good thing. What I sketched however, was broadly consistent with
Robert Skidelsky's sketch of Keynes' contribution in yesterday's
(12/14/08) issue of the New York TIMES Magazine. He's much more of a
Keynes scholar than I am, much more able to decide whether some
program is "Keynesian" or not.
In any event, Keynes' main concern in major works such as his GENERAL
THEORY was with exactly the same kind of issues that proposed stimulus
programs are supposed to deal with, i.e., mass unemployment. Perhaps I
am wrong, but Keynes saw his work in practical policy issues (The
Economic Consequences of the Peace, etc.) as more important than his
more speculative works.
> What's wrong with the program, then, is, one, IT WON"T WORK, two, its
> inevitable FAILURE will be used to lend ideological support to the
> subsequent draconian "restraint" package and, three, it is yet another
> instance of TRICKLE-DOWN economics.
1. Yes, standard US Keynesianism is a form of trickle-down economics,
but it does not have to be so. The European "left Keynesianism" of
Robinson and others should be mentioned.
By the way, in my earlier missive I did mention the quite-possible
failure of Obamanomics to deal with the inequality problem. So we
agree.
2. "inevitable" failure? I thought social scientists (outside of the
more extreme "Chicago" schoolers and some very old-fashioned Marxists)
had almost all abandoned notions of inevitability.
3. I don't see how a allegedly inevitable failure to create jobs would
set the stage for the destruction of jobs ("the subsequent draconian
'restraint' package"). Please explain.
> But why won't it work? Because fiscal policy doesn't operate in a
> vacuum. With the exception of four years at the end of the Clinton
> administration, the U.S. government has been running substantial
> budget deficits for 30 years. The U.S. economy has evolved all sorts
> of levers to maximize the rent-enhancing rake-off from this activity
> and minimize the job-creating by-product. Every dollar expropriated by
> "management fees" is one less dollar in wages.
1. I mentioned _both_ of these issues in the missive to which Tom
responds. So, despite his seemingly hostile tone toward what I wrote,
we basically agree.
2. The establishmentarian concern with current deficits and government
debt seems to have faded, in the face of the magnitude of the current
crisis. I mentioned various concerns about the deficit. What are your
concerns, Tom?
Of course, if the concern with deficits and debt is still really
strong, then demand-side stimulus may never be tried. But that's a
completely different issue than the efficacy of demand-side stimulus.
If the issue is political, not economic, the key thing is to put
pressure on the government to actually stimulate the economy to deal
with the unemployment situation, to add steel to its back.
3. Management fees do not simply disappear from the economic system.
Managers buy McMansions, cocaine, etc., which provide demand for
others' labor-time. There is thus a demand-side multiplier effect of
the sort I discussed.
On the other hand, this kind of rent-seeking behavior is exactly the
kind of problem that I mentioned as stunting growth of the supply
side. So at least concerning supply side impact of the "stimulus," Tom
and I agree.
> The "job creation" in an economic stimulus package is implicit, not
> explicit. Although some job creation from a multi-hundred billion
> dollar spending program is unavoidable, it has become the prevailing
> management conventional wisdom to minimize employment outcomes
> whereever possible. ...
Managers cannot change the ratio between the number of goods and
services produced and the paid hours of labor-power hired (labor
productivity) in a big way. They are not all-powerful and cannot snap
their fingers to abolish current technological limits overnight.
Obviously, they can speed up production or figure out how to get more
hours without paying more (stretch out). But there are limits to that
(but fewer nowadays in the US, where the labor movement is on the
ropes). To the extent that unemployment falls, these limits become
tighter.
This tells us that as the demand for goods and services rises compared
to the growth rate of labor productivity, the availability of jobs
will rise too. Initially, with high unemployment, the growth of labor
productivity might be faster than the trend (due to speed-up and
stretch-out), weakening job creation compared to recent experience,
but if stimulus continues, that growth rate will move down toward the
trend and perhaps even below it. Thus job creation will happen
eventually.
Also, note that if the US government has any kind of commitment to
dealing with the worsening unemployment problem, the failure of
aggregate demand stimulus to increase employment (due to the
counteracting effect of productivity rises) would simply cause the
government to try harder.
The key thing is to put pressure on the government to actually
stimulate the economy to deal with the unemployment situation, to add
steel to its back.
> Now this isn't to say that there are not things that the federal
> government should be spending money on, such as universal health care.
> Only that they don't have to be funded by deficit spending as a
> "stimulus package". They could be funded by higher taxes on the
> wealthy, for example.
1. Universal health care is a good idea, as I've said before.
If done right it would be more efficient than the current (extremely
wasteful) system in the US. All else equal this likely would cause a
lot of unemployment in the insurance sector. In general, that's a good
idea, but in a serious crisis it does not seem to be so. Additional
policies seem needed, e.g., the kind of green infrastructural
investment that I mentioned in the message that Tom's responding to.
2. While hiking taxes on the rich is a good idea, all else equal it
would hurt aggregate demand. This has to be counteracted by tax cuts
for the rest of us -- or increases in government spending (which is
what we were talking about).
> If they [good things] are being marketed as "stimulus" then
> odds are that's because the rich will be given a pass on tax
> increases.
"odds are"? I thought the failure of demand-side stimulus was
"inevitable" and not based on odds! In any event, the results of
political processes are never inevitable. The rich may be given a pass
on tax increases, but Obama has promised to let the pro-rich tax cuts
that Bush and Congress instituted lapse. Now, it's quite possible that
he (like other politicians) will forget that promise and many others.
But we shouldn't presume that will happen.
The key question is whether Obama's followers will simply rely on
their "Fearless Leader" to do the job for them or will put pressure on
him to keep him honest (or, rather, as honest as he's been).
> So you were saying you're for continuing the Bush tax
> give-aways to the rich, Jim? ...
No. I'd like to see some evidence that I have that opinion. I'll thank
you to avoid attributing opinions to me that I don't have. I'm sick of
that kind of stuff. I hope that you're not going to accuse me of
dishonesty (based on better knowledge of my motives than I have).
> What amazes me is that the same [unnamed] people who so distrust the
> Clinton-slant of the incoming Obama personnel seem pretty sanguine
> about the emerging stimulus package consensus yet dismissive or
> hostile to an anti-growth, environmental sustainability argument.
You'll note that I mentioned the environmental impact in my previous
missive. Either (1) in your paragraph immediately above, you are not
criticizing stuff that I wrote; or (2) maybe I should heed the fact
that so many simply ignore what I write and just stop contributing to
pen-l...
> I call this the "growthodoxy". It seems to me that the seismic fault
> line lies between economic growth and environmental sustainability.
1. Who is it who embraces this "growthodoxy," Tom? Or are we talking
about scare-crows set up simply so that they can be knocked down?
2. When you use the phrase "economic growth," do you mean the growth
of conventionally-measured real GDP? If so, there is such a "fault
line."
3. But the true fault line refers to the long-term growth of real GDP,
not to cyclical matters. For example, if Obama is really committed to
"green" growth, the demand-side can be stimulated just as much by
spending on cleaning up or preventing environmental damage as by
building skyscrapers or invading other countries. Spending money on
electric cars or mass transport helps demand just as much as spending
on tanks.
> This is not to say that ALL economic growth is environmentally bad,
> just that aggregate growth in rich countries, TODAY, is net bad
> (ecological foot prints and path dependency and all that).
Okay, but are you advocating an economic depression as the solution?
It seems that economic depressions simply delay the problem. People
want to get jobs and return to the "good old days" as soon as they
can, so they can buy SUVs, etc. One reason why people in the 1950s and
many other eras in the US have said "damn the environment, full speed
ahead!" is because they saw the alternative as being economic
stagnation, persistent joblessness, and "hard times."
> Progressive
> policy has to pick and choose among growth elements and oppose growth
> for growth's sake.
Again, we agree!! Again, I don't understand the origin of the
apparently hostile tone of your missive, Tom. Or maybe I'm misreading
your tone.
> The argument between "fiscal conservatives" and
> so-called Keynesians is simply what is the best way to achieve growth.
> When the good cop so-called Keynesian strategy fails the fiscal
> conservatives will be there with the bad cop supply-side panacea of
> corporate and capital gains tax cuts.
1. So-called supply-side tax cuts have always been a right-wing
version of Keynesianism: in theory they promise to help the
supply-side, but in practice they boost demand. (The exception is the
common "supply sider" wish to go back to the gold standard.)
2. In any event, the political and academic rise of supply-side
economics and other abominations (monetarism, etc.) was a result of
the failure of 1950s/1960s warfare-welfare state Keynesianism, itself
largely the result of the end of the nation-state-based "growth model"
of that period (with the Vietnam war, the end of fixed exchange rates,
and internationalization of capital).
3. The failure of the "old model" does not say that _all_ Keynesian
demand-stimulus is futile, however. It just has to be adapted to
current conditions.
> Coming back to Keynes, we most certainly have arrived at (or far
> beyond) the point where "wise consumption" and working less would be
> his policy prescription.
This policy recommendation by Keynes (more vacations, etc.) that Tom
has cited before, though very attractive, was his response to the
presumption that consumer spending would stagnate.
But in recent memory (up to just a few months ago), consumer spending
was booming, going too far (at least according to the conventional
wisdom). This suggests that we should work _more_ hours per year, not
less. Of course, that's what capitalism provided (for those with
jobs).
This doesn't suggest that capitalism's dynamics are wonderful (far
from it) but instead that Keynes' speculations about secular
stagnation are a bit irrelevant.
> ... The stimulus package crap, though, is based on
> textbook models that are neither faithful to Keynes nor coherent in
> their own right. It is doctrine that has evolved into dogma.
1. a "dogma"? Until just a few months ago, establishmentarians had
shunned Keynes like the plague. I don't see how something can be
simultaneously a fashion (which suggests that it's temporary) and a
dogma (which makes it sound unchanging).
2. Besides, can we assume that all dogmas are wrong? don't they have
to be argued against instead? Tom, you really haven't shown that the
stimulus package or textbook models contradict Keynes' more well-known
and substantial works (such as the GENERAL THEORY) or that they are
incoherent.
Your differences with what I said seems primarily based on (a) a
contingent political analysis which could change with the balance of
power and (b) a rejection of the historical link between aggregate
demand growth and falling unemployment.
I'm sure I've left something out, but I have other things to do...
--
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.
_______________________________________________
pen-l mailing list
[email protected]
https://lists.csuchico.edu/mailman/listinfo/pen-l
