Question about your very clear explanation: wouldn't you say that, once
stimulus deficit policies have run their course for years and recession
still ensues, at some near point diminishing returns preclude further
Keynesian remedies, even of the spending balanced by more taxes variety
or limitation of incomes in the face of inflation, especially in a
period of unsustainable individual indebtedness in the absence of
individual savings? That's what I was reaching for, anyhow. The
ordnance is spent.
Ralph
Paul wrote:
Ralph Johansen writes:
I'm puzzled here - don't Keynesian panaceas call for heavy deficit
spending, and if so how is that remotely feasible given the humongous
deficit the US now has? Or are you still referring to Germany, whose
deficit I know nothing about? Or is this discussion all as they say
academic?
Good question.
I would say that while there are several versions of "keynesian"
policies,
the standard U.S. version has become limited to stimulative (or
restrictive) fiscal OR monetary policies. In the fiscal category a
budget
deficit is the main stimulative "tool" but one could also turn to the
so-called 'balanced budget multiplier' (more spending equally balanced by
more taxes - but the package as a whole stimulates the economy because
unused savings are mobilized). Of course this "increases the size of
government" and in the US this has often only been justified as military
expenditure or under great social pressure. The other category is
monetary
policy, the so-called easy money policy.
Larry Summers of the Clinton Treasury argued that their policy of
eliminating the deficit was, in fact, "prudent re-loading of the fiscal
cannon" so that fiscal policy would be ready for the next recession and
that the Bush Administration has frittered away this asset. One could
also
argue that the current deficit is what has been saving the US from
stagnation or recession; or one could argue that stimulative policies
(especially when mis-timed) have a lot less impact than many would think.
There have been broader versions of Keynesian policies. For example,
Phillip Arestis, a prominent UK post-Keynesian argues that an incomes
policy and wage/price controls are necessary parts of the Keynesian tool
kit (controls are needed to push for full employment without
inflation). From a different political perspective, in the '60s and '70s
American Post-Keynesians were very concerned that wages not grow faster
that productivity. Sydney Weintraub had a "TIP" Tax-based Incomes Policy
proposal after Lyndon Johnson's wage-price guidelines collapsed and they
lent (and lost!) credibility to Nixon's Wage/Price controls.
Many Post-Keynesians in the developing world in the 1970's argued for
redistribution policies in order to ensure adequate effective demand.
They
drew on Kaldor's work with ECLAC (and a bit on Kalecki in the early UN).
Paul
