I piggyback on Fr. Devine's Mankiw-chew.
Jim Devine wrote:
Most notably, Lawrence H. Summers, the new head of the National
Economic Council, is Mr. Samuelson's nephew.
[So blood runs true? Are the sins of the fathers visited upon the
nephews? Mr. Mankiw, this is extremely silly!]
Rilly.
In practice, however, the multiplier for government spending is not
very large. The best evidence comes from a recent study by Valerie A.
Ramey, an economist at the University of California, San Diego. Based
on the United States' historical record, Professor Ramey estimates
that each dollar of government spending increases the G.D.P. by only
1.4 dollars. So, by doing the math, we find that when the G.D.P.
1.4 isn't so shabby. Krugman used 1.5 in his column.
WILL THE EXTRA SPENDING BE ON THINGS WE NEED? If you hire your
neighbor for $100 to dig a hole in your backyard and then fill it up,
and he hires you to do the same in his yard, the government
statisticians report that things are improving. The economy has
created two jobs, and the G.D.P. rises by $200. But it is unlikely
that, having wasted all that time digging and filling, either of you
is better off.
I love that NGM is attacking the mainstream notion of GDP as synonymous
with economic well-being.
The way to avoid this problem is a rigorous cost-benefit analysis of
each government project. Such analysis is hard to do quickly, however,
especially when vast sums are at stake. But if it is not done quickly,
the economic downturn may be over before the stimulus arrives.
[Obama's folks, I am sure, are quite aware of this issue. It's shown
up in a lot of the mainstream media's punditry. Mankiw acts like it's
somehow new to him.]
The problem is that the Obamanians think they can fix it. They can't.
HOW WILL IT ALL END? Over the last century, the largest increase in
the size of the government occurred during the Great Depression and
World War II. Even after these crises were over, they left a legacy of
higher spending and taxes. To this day, we have yet to come to grips
This 'legacy' meant that Federal debt as a share of GDP slid down from
114% after WWI to less than 30% by the end of the 70s. Then Reagan
fixed that.
with how to pay for all that the government created during that era —
a problem that will become acute as more baby boomers retire and start
collecting the benefits promised.
Cue the "IOUSA" cult, trying to change the subject from recession to
their peeves about debt.
Methinks we will come to a point where the Feds will have to squarely face
the need for directly administered mass relief and mass employment projects.
Second, there is a sense in which dwelling on counter-cyclical policy
understates
the depth of the systemic problems at hand. We're in the frame of
getting the
business cycle unstuck, when we weren't thrilled with the state of
affairs when
the economy was on trend.
Third, the whole emphasis now is on reducing an "output gap" (7% says CBO).
But in consideration of T. 'Father Time' Walker, this is not the way to
go. We
have rather a well-being gap that is not necessarily served by policies
aimed at
(and succeeding in a limited way) herding people back into employment.
As a fellow eventually known as "Eldridge du Paris" once said,
it's time to intensify the struggle.
_______________________________________________
pen-l mailing list
[email protected]
https://lists.csuchico.edu/mailman/listinfo/pen-l
