Economics

[AmazonTania]

Keynesians understand that the economy is already a HUMAN CONTRIVANCE , Amazon.

They understand that there is no such thing as a FREE MARKET.

So do the right wing masters, of course, but they will not admit it because they also know it is contrived for the benefit of capital (hence our system being "capitalist") but have duped so many of us into thinking that an economy operates like GRAVITY and would exist sans any overarching human control.

Its a preposterous POV, of course, but that BIG LIE works really well on the macro-economically ignorant.

If you are referring to Laissez-faire, then you are correct. But a Free-Market doesn't require Laissez-faire. It requires small government intervention or small to the extent where economic sectors are not heavily regulated by the Government. Hong Kong and Singapore are examples of a modern day Free Market economy. They're probably not as free as many Libertarians would like it to be, but that doesn't change the fact that they are the freest economies in the world right now.

If you want to see how the free market really works this is the place to come. - Milton Freedom discussing Hong Kong (Free To Choose, Volume 1 - The Power of the Market)

The Keyensian theory believes that most major downturns in the economy are the result of Free Markets run amok, which is generally not true. Not in the case of the Great Depression or the Great Recession. The economy doesn't operate like gravity, and no one ever implied that the Government is suppose to operate like a magic wand, but some policies makes more sense than others. When I see centrally planned policies, I generally see good intentions gone horribly wrong.

But then again, a free market cannot work without laizzez-faire ala Adam Smith's concept of that. Whenever government intercepts and presumes to manipulate or micro or macro manage the economy, components of the laizzez-faire principle are sidetracked with generally unpleasant and detrimental unintended consequences.

Going back to Walter Williams excellent illustration of laizzez-faire principles:

. . . .Our economic system consists of billions of different elements that include members of our population, businesses, schools, parcels of land and homes. A list of possible relationships defies imagination and even more so if we include international relationships. Miraculously, there is a tendency for all of these relationships to operate smoothly without congressional meddling. Let's think about it.

The average well-stocked supermarket carries over 60,000 different items. Because those items are so routinely available to us, the fact that it is a near miracle goes unnoticed and unappreciated. Take just one of those items — canned tuna. Pretend that Congress appoints you tuna czar; that's not totally out of the picture in light of the fact that Congress has recently proposed a car czar for our auto industry. My question to you as tuna czar is: Can you identify and tell us how to organize all of the inputs necessary to get tuna out of the sea and into a supermarket? The most obvious inputs are fishermen, ships, nets, canning factories and trucks. But how do you organize the inputs necessary to build a ship, to provide the fuel, and what about the compass? The trucks need tires, seats and windshields.

It is not a stretch of the imagination to suggest that millions of inputs and people cooperate with one another to get canned tuna to your supermarket.

But what is the driving force that explains how millions of people manage to cooperate to get 60,000 different items to your supermarket? Most of them don't give a hoot about you and me, some of them might hate Americans, but they serve us well and they do so voluntarily. The bottom line motivation for the cooperation is people are in it for themselves; they want more profits, wages, interest and rent, or to use today's silly talk — people are greedy.

Adam Smith, the father of economics, captured the essence of this wonderful human cooperation when he said, "He (the businessman) generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. ... He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain." Adam Smith continues, "He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ... By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." And later he adds, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."
Economic Miracle by Walter E. Williams on Creators.com - A Syndicate Of Talent

The best thing government can do for us is to put just enough regulation into effect to prevent us from doing physical, economic, and/or environmental violence to each other, and then turn us loose to do what people do best--create wealth and prosperity. THAT, in a nutshell, is what supply sided economics is. It is not just keeping the taxes low so the people retain more of their money, but providing the necessary freedoms to use it for their best advantage.

It is the antithesis of Keynesian economics which suggests that government can manage the economy by taking the people's money and giving it back them in some form. Unfortunately a government operating under that system will become like ours--it siphons off 2/3rds of the money to feed itself.

Well, Laissez-faire allows for enough regulation to protect Property Rights, but a strong protection of Property Rights is essential for capitalism to function in general. But the premise of laissez-faire is a self-regulating society. Can a Free Market have zero government regulation? Sure, but people focus too much on the word 'free' to suggest that an economy must be free from government intervention in order to be a true free market. This is false. As long as sectors in the economy can operate freely without the overburdening and heavily regulated state, then you can have a free market.

 

[Foxfyre]

There is no empirical evidence that Keynesian economics has been truly successful anywhere it has been tried.

In our own history, the first effort at using Keynesian economics was FDR's "New Deal" that most credible historians now credit with actually prolonging the Great Depression. And its legacy is not pretty either:



While Reagan's return to supply sided economics boosted job creation, halted and reversed runaway inflation, and ushered in a sustained period of economic growth. The U.S. economic growth between 2002 and 2007 exceeded the entire economy of China.


Obamanomics: The Final Nail In the Discredited Keynesian Coffin - Forbes

Those who see government as the lawful master of the people and the role of the people is to serve government will generally embrace the bastardized version of Keynesian economics that says we can spend ourselves into prosperity. (Keynes himself would never have advocated Keynesian economics as the U.S. has embraced it.)

Freedom loving people who see the role of government as serving the people, will reject Keynesian economics every time.

I always see reagan heralded as a great man that gave America hope, sent us on a decades long boom etc. But he did basically what FDR did. Increased deficit drastically. FDR had a really drastically disabled economy on his hands and then a major war afterwards to explain his deficit. He also managed to do something for the working class on the way. Social security, fair labor acts, price supports for farms, on and on including electrification of rural america. Arguments could be made that his policies destroyed America, but I just don't buy that argument as someone coming of age in the early 60's. Too many oldsters I knew that loved FDR. "He saved our farm" was a typical one and there was a hatred for hoover and repubs in general although Ike did get the white house in '52, being a war hero and all. Reagan drastically increased the debt and for what? Fight the cold war? That's a pretty subjective argument that could go on forever, but FDR's war was for real. What's the republican plan for the rest of us? Race to the bottom for wages, roll back regulations and tax cuts for the rich. What else? My opinion but I'm open to criticism or even scorn. Trying to sort things out.

FDR averaged 20% unemployment from his inauguration until Hitler conquered France 7 years later, whats so great about that? How did that help the middle class?

We either look at it from the macro perspective of overall policy and results, or we attempt to compress that to fit our perception based on personal history or experience. While both are valid in evaluating anything, our own experience or any other anecdotal evidence is rarely the best way to establish or evaluate policy for a large nation.

 

[Toddsterpatriot]

We have the debt we do today because of "supply-side" theories, which are decidedly anti-Keynesian. We were told that cutting taxes at full employment would stimulate they economy and "pay for itself" thus not increasing the debt. Both Reagan and Bush 43 did this massively.

Reagan and Bush 43 cut taxes at full employment? When was that?

Where does "supply-side" theory say that tax cuts will pay for themselves?

It surprises me that you would ask when Reagan or Bush cut taxes. Besides being the centerpiece of rightwing propaganda and the signature achievement of their presidencies, this is a matter of public record. Try 1981 and 2001 & 2003.

Now if you plan to whine that we were not near full employment in 1981 and 2001, I suggest you review the arguments for them at the time. If these tax cuts were anti-cyclical, then they would have been cheerfully abandoned after a year or so. But they were proclaimed as permanent cuts in the case of Reagan, or treated as permanent in the case of Bush. Supply-side economics claims that tax cuts are always a good idea, in good times or bad, regardless of the deficit. It wants to cut taxes when times are good rather than reduce the debt, and cut taxes when times are bad to be anti-cyclical. In your universe, when are taxes ever to be raised for any purpose?

As for supply-side theory of tax cuts being self-funding, if you want me to prove this to you, you clearly have not been listening to the debate.

This kind of argument is what I have been railing against. You are so intent on trying to score debating points that you are making ludicrous arguments and destroying the very positions you defend. Thanks for making my point for me.

It surprises me that you would ask when Reagan or Bush cut taxes.

It surprises me that you claimed they did it when we were at full employment.

If these tax cuts were anti-cyclical, then they would have been cheerfully abandoned after a year or so.

Why would you abandon a pro-growth tax cut?

Supply-side economics claims that tax cuts are always a good idea, in good times or bad, regardless of the deficit.

And what does it claim about government spending?

As for supply-side theory of tax cuts being self-funding, if you want me to prove this to you, you clearly have not been listening to the debate.

You made the claim, why would I want you to prove it?

You are so intent on trying to score debating points that you are making ludicrous arguments

Actually, I was asking you to provide backup for your ludicrous arguments. Thanks for making my point for me.

 

[Foxfyre]

If you are referring to Laissez-faire, then you are correct. But a Free-Market doesn't require Laissez-faire. It requires small government intervention or small to the extent where economic sectors are not heavily regulated by the Government. Hong Kong and Singapore are examples of a modern day Free Market economy. They're probably not as free as many Libertarians would like it to be, but that doesn't change the fact that they are the freest economies in the world right now.

If you want to see how the free market really works this is the place to come. - Milton Freedom discussing Hong Kong (Free To Choose, Volume 1 - The Power of the Market)

The Keyensian theory believes that most major downturns in the economy are the result of Free Markets run amok, which is generally not true. Not in the case of the Great Depression or the Great Recession. The economy doesn't operate like gravity, and no one ever implied that the Government is suppose to operate like a magic wand, but some policies makes more sense than others. When I see centrally planned policies, I generally see good intentions gone horribly wrong.

But then again, a free market cannot work without laizzez-faire ala Adam Smith's concept of that. Whenever government intercepts and presumes to manipulate or micro or macro manage the economy, components of the laizzez-faire principle are sidetracked with generally unpleasant and detrimental unintended consequences.

Going back to Walter Williams excellent illustration of laizzez-faire principles:

. . . .Our economic system consists of billions of different elements that include members of our population, businesses, schools, parcels of land and homes. A list of possible relationships defies imagination and even more so if we include international relationships. Miraculously, there is a tendency for all of these relationships to operate smoothly without congressional meddling. Let's think about it.

The average well-stocked supermarket carries over 60,000 different items. Because those items are so routinely available to us, the fact that it is a near miracle goes unnoticed and unappreciated. Take just one of those items — canned tuna. Pretend that Congress appoints you tuna czar; that's not totally out of the picture in light of the fact that Congress has recently proposed a car czar for our auto industry. My question to you as tuna czar is: Can you identify and tell us how to organize all of the inputs necessary to get tuna out of the sea and into a supermarket? The most obvious inputs are fishermen, ships, nets, canning factories and trucks. But how do you organize the inputs necessary to build a ship, to provide the fuel, and what about the compass? The trucks need tires, seats and windshields.

It is not a stretch of the imagination to suggest that millions of inputs and people cooperate with one another to get canned tuna to your supermarket.

But what is the driving force that explains how millions of people manage to cooperate to get 60,000 different items to your supermarket? Most of them don't give a hoot about you and me, some of them might hate Americans, but they serve us well and they do so voluntarily. The bottom line motivation for the cooperation is people are in it for themselves; they want more profits, wages, interest and rent, or to use today's silly talk — people are greedy.

Adam Smith, the father of economics, captured the essence of this wonderful human cooperation when he said, "He (the businessman) generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. ... He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain." Adam Smith continues, "He is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. ... By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." And later he adds, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."
Economic Miracle by Walter E. Williams on Creators.com - A Syndicate Of Talent

The best thing government can do for us is to put just enough regulation into effect to prevent us from doing physical, economic, and/or environmental violence to each other, and then turn us loose to do what people do best--create wealth and prosperity. THAT, in a nutshell, is what supply sided economics is. It is not just keeping the taxes low so the people retain more of their money, but providing the necessary freedoms to use it for their best advantage.

It is the antithesis of Keynesian economics which suggests that government can manage the economy by taking the people's money and giving it back them in some form. Unfortunately a government operating under that system will become like ours--it siphons off 2/3rds of the money to feed itself.

Well, Laissez-faire allows for enough regulation to protect Property Rights, but a strong protection of Property Rights is essential for capitalism to function in general. But the premise of laissez-faire is a self-regulating society. Can a Free Market have zero government regulation? Sure, but people focus too much on the word 'free' to suggest that an economy must be free from government intervention in order to be a true free market. This is false. As long as sectors in the economy can operate freely without the overburdening and heavily regulated state, then you can have a free market.

The premise of laizzez-faire for a free people does require the government to prevent us from doing physical, economic, or environmental damage to each other--i.e. secure our unalienable rights. But a free market does not exist without co-existing with laizzez-faire.

. . . .The truth is that the alternative is not between a dead mechanism or a rigid automatism on one hand and conscious planning on the other hand. The alternative is not plan or no plan. The question is whose planning? Should each member of society plan for himself, or should a benevolent government alone plan for them all? The issue is not automatism versus conscious action; it is autonomous action of each individual versus the exclusive action of the government. It is freedom versus government omnipotence.

Laissez faire does not mean: Let soulless mechanical forces operate. It means: Let each individual choose how he wants to cooperate in the social division of labor; let the consumers determine what the entrepreneurs should produce. Planning means: Let the government alone choose and enforce its rulings by the apparatus of coercion and compulsion.

Under laissez faire, says the planner, it is not those goods which people “really” need that are produced, but those goods from the sale of which the highest returns are expected. It is the objective of planning to direct production toward the satisfaction of the “true” needs. But who is to decide what the “true” needs are? . . . .

. . . .Laissez faire means: Let the common man choose and act; do not force him to yield to a dictator.
The Meaning of Laissez Faire | Cato Institute

 

[oldfart]

People speak of Keynesian or Austrian economic theories as though they were FORMULAS for how economies ought to be run in every circumstance.

Keynesianism is a proposed RESPONSE to a specific economic circumstance (deflationary depression), and NOT a formula for how an economy ought to run all the time.

Keynesians tend to believe that the economy should be centrally planned, regulated heavily or regulated to the degree that Depressions should not happen.

Sounds like they have an idea of how the economy 'ought to run' to me...

I think you are being overly selective here. There is nothing about Keynesian models that implies central planning beyond the level existing in the UK or US circa 1930. Keynes assumes a budget, a treasury, and a central bank, nothing more. I don't recall reading Hicks or Samuelson (or for that matter Stiglitz or Krugman) proposing any more developed central planning apparatus. If I have missed something, please point me in the right direction with the citations to Keynesians who wax eloquent over Gosplan.

The issue of financial regulation is not Keynesian; in fact it really is not even macro policy. Everyone wants markets to function effectively. Most give at least lip service to competitive markets being better than non-competitive (i.e. overconcentrated) markets. If being anti-monopolistic is Keynesian, you give Keynesian ideas credit for a good idea well beyond it commonly understood scope.

So, is your point that financial markets are over-regulated? And just how do you propose to cure that?

 

[oldfart]

It is interesting to go back to an analysis of the U.S. budget, deficits, and effects of the economy at CATO in 1982--this was after the initial Reagan tax increases and before supply side went into effect:

I think you have a slip here. The 1981 tax act was a full-throated tax cut. The 1982, 1983, and 1986 acts were tax increases, mainly by pullbacks on things like depreciation and broadening the tax base by, for example, taxing Social Security benefits and unemployment insurance which had previously been nontaxable and changing the rules on taxing pension income.

By 1996 CATO published this re Reaganomics:

On 8 of the 10 key economic variables examined, the American economy performed better during the Reagan years than during the pre- and post-Reagan years.

I would agree that in 1982 and 1996 the Cato Institute waxed eloquent about the economic accomplishments of the Reagan years.

But then in 2013, backing up the Forbes report previously posted, the Laffer Center publishes:

Yet in the roughly 30 years from the 1980s through the first decade of the new century, supply-side ideas contributed to the longest boom in United States history and an incredible transformation of the world economy.

According to the National Bureau of Economic Research, 1982-1999 was one continuous mega-economic expansion. In fact, as it stretched into 2007, this 25 Year Boom saw a tripling in the net wealth of U.S. households and businesses from $20 trillion in 1981 to $60 trillion by 2007. When adjusted for inflation, more wealth was created in this 25 year boom than in the previous 200 years.

OK, according to the Laffer Center using NBER statistics, we had a great 25 year run in the Reagan, Bush 41, Clinton, and early Bush 43 years. What conclusion are you trying to draw from that? The period was one of predominantly Keynesian monetary policy by the Fed, sometimes Keynesian and sometimes "supply-side" fiscal policies, and a monotonic start-and-stop policy of deregulation. How do you apportion that success among those disparate policies?

 

[Foxfyre]

People speak of Keynesian or Austrian economic theories as though they were FORMULAS for how economies ought to be run in every circumstance.

Keynesianism is a proposed RESPONSE to a specific economic circumstance (deflationary depression), and NOT a formula for how an economy ought to run all the time.

Keynesians tend to believe that the economy should be centrally planned, regulated heavily or regulated to the degree that Depressions should not happen.

Sounds like they have an idea of how the economy 'ought to run' to me...

I think you are being overly selective here. There is nothing about Keynesian models that implies central planning beyond the level existing in the UK or US circa 1930. Keynes assumes a budget, a treasury, and a central bank, nothing more. I don't recall reading Hicks or Samuelson (or for that matter Stiglitz or Krugman) proposing any more developed central planning apparatus. If I have missed something, please point me in the right direction with the citations to Keynesians who wax eloquent over Gosplan.

The issue of financial regulation is not Keynesian; in fact it really is not even macro policy. Everyone wants markets to function effectively. Most give at least lip service to competitive markets being better than non-competitive (i.e. overconcentrated) markets. If being anti-monopolistic is Keynesian, you give Keynesian ideas credit for a good idea well beyond it commonly understood scope.

So, is your point that financial markets are over-regulated? And just how do you propose to cure that?

Keynes didn't propose any long term policy. His idea was a one-time expenditure to jump start a stalled economy--an expenditure that could realisitically be quickly repaid to the treasury.

One example of a successful Keynesian project:

When Intel announced in 1993 that it wanted to build a new U.S. plant to make the new Pentium and next-generation P6 chips, New Mexico officials, longing to diversify from natural resource extraction and government jobs, unveiled the most lucrative come-hither campaign the state had ever seen.

Beating Texas, California, Oregon, Arizona and Utah for Intel's affections, New Mexico laid out $57 million in property tax abatements, $36 million in waived new-equipment sales taxes and $20 million in manufacturing tax credits. Taxpayers would foot $1 million for training Intel workers, air pollution permitting would be streamlined and Sandoval County, in addition to floating a $2 billion bond issue for Intel, granted the chipmaker a lease on its mesa property you would have loved back in college: Intel may grant easements and build or raze improvements at will. It may sublease without the county's approval and it has the option to buy the Rio Rancho site for $1 at the end of the lease term.

Their reward was Intel's $1.8 billion Fab 11, a project that would become the third largest industrial expansion in the world that year. Intel is now New Mexico's largest employer in a single location--only Wal-mart is larger overall. It has propelled Rio Rancho to New Mexico's third largest and still fastest growing city and this year was rated one of the nation's ten best cities in which to raise a family.

(Partially borrowed and paraphrased from several sources.)

The returns to the state have far exceeded those temporary cash outlays. If only we had a legislature with the smarts to go after other projects like that, but we don't.

Keynes always though the temporary outlays should go for projects like Intel, for major necessary infrastructure, etc. that would allow a contractor to get back to work, employ people, etc. toward this generating more activity and helping a stalled economy rebound. And sometimes it does work. True Keynesianism is not micromanagement or macromanagement of the economy.

Supply side, properly applied, works every time it is tried, however.

 

[oldfart]

The Keyensian theory believes that most major downturns in the economy are the result of Free Markets run amok, which is generally not true. Not in the case of the Great Depression or the Great Recession.

I'm a little puzzled at this. Keynes was intimately familiar with the functioning of markets (partly by being a wildly successful commodity and foreign exchange speculator). He set great store by the "animal spirits" explanation of market behavior. It was his belief that some way must be found to prevent the periodic market crises (which I think he regarded as an inherent part of the nature of capitalism) from triggering such profound depressions as would destroy capitalism in a sea of bolshevism. He saw the choices as vigorous free markets combined with a fiscal and monetary policy robust enough to avoid depressions or Stalinist central planning.

Some later Keynesians supported more market regulation and some less. But that's not the axis that defines Keynesian theory. Keynesian theory is that periodic mild to moderate market crises are an inherent part of the capitalist free market system and that they serve a purpose in the process of market corrections and adjustments. Perhaps Milton Friedman was a better Keynesian in this regard than many of his more liberal peers!

The economy doesn't operate like gravity, and no one ever implied that the Government is suppose to operate like a magic wand, but some policies makes more sense than others. When I see centrally planned policies, I generally see good intentions gone horribly wrong.

I would agree, in general. What do you mean by "centrally planned policies"? Is this a reference to a national budget? to a central bank? What is your reference to here?

 

[AmazonTania]

People speak of Keynesian or Austrian economic theories as though they were FORMULAS for how economies ought to be run in every circumstance.

Keynesianism is a proposed RESPONSE to a specific economic circumstance (deflationary depression), and NOT a formula for how an economy ought to run all the time.

Keynesians tend to believe that the economy should be centrally planned, regulated heavily or regulated to the degree that Depressions should not happen.

Sounds like they have an idea of how the economy 'ought to run' to me...

I think you are being overly selective here. There is nothing about Keynesian models that implies central planning beyond the level existing in the UK or US circa 1930. Keynes assumes a budget, a treasury, and a central bank, nothing more. I don't recall reading Hicks or Samuelson (or for that matter Stiglitz or Krugman) proposing any more developed central planning apparatus. If I have missed something, please point me in the right direction with the citations to Keynesians who wax eloquent over Gosplan.

These are generally what Neo-Keynesians support. And yes, Krugman has advocated for regulated economy. Not heavily regulated, and to operate as free as possible (or free as Krugman would allow, which suggest central planning). I heard him during his debate with Ron Paul. You can check it out on YouTube if you want.

The issue of financial regulation is not Keynesian; in fact it really is not even macro policy. Everyone wants markets to function effectively. Most give at least lip service to competitive markets being better than non-competitive (i.e. overconcentrated) markets. If being anti-monopolistic is Keynesian, you give Keynesian ideas credit for a good idea well beyond it commonly understood scope.

Most people are against monopolies. I -- for one -- have no problem with monopolies, so long as they give me all the goods and services I need at a good price.

So, is your point that financial markets are over-regulated? And just how do you propose to cure that?

Being in the securities industry, I know all too well how financial markets are over-regulated. Most of these regulations have well intended goals, but usually operate to the detriment of the economy. Mostly one regarding a central bank.

 

[CrusaderFrank]

I always see reagan heralded as a great man that gave America hope, sent us on a decades long boom etc. But he did basically what FDR did. Increased deficit drastically. FDR had a really drastically disabled economy on his hands and then a major war afterwards to explain his deficit. He also managed to do something for the working class on the way. Social security, fair labor acts, price supports for farms, on and on including electrification of rural america. Arguments could be made that his policies destroyed America, but I just don't buy that argument as someone coming of age in the early 60's. Too many oldsters I knew that loved FDR. "He saved our farm" was a typical one and there was a hatred for hoover and repubs in general although Ike did get the white house in '52, being a war hero and all. Reagan drastically increased the debt and for what? Fight the cold war? That's a pretty subjective argument that could go on forever, but FDR's war was for real. What's the republican plan for the rest of us? Race to the bottom for wages, roll back regulations and tax cuts for the rich. What else? My opinion but I'm open to criticism or even scorn. Trying to sort things out.

FDR averaged 20% unemployment from his inauguration until Hitler conquered France 7 years later, whats so great about that? How did that help the middle class?

We either look at it from the macro perspective of overall policy and results, or we attempt to compress that to fit our perception based on personal history or experience. While both are valid in evaluating anything, our own experience or any other anecdotal evidence is rarely the best way to establish or evaluate policy for a large nation.

Yet, unemployment still averaged 20% for 7 years.

 

[CrusaderFrank]

Keynes is the Manmade Global Warming Theory of Economics. It's never worked in real life, not even once but its adherents will defend it to the death of the US economy

 

[Foxfyre]

FDR averaged 20% unemployment from his inauguration until Hitler conquered France 7 years later, whats so great about that? How did that help the middle class?

We either look at it from the macro perspective of overall policy and results, or we attempt to compress that to fit our perception based on personal history or experience. While both are valid in evaluating anything, our own experience or any other anecdotal evidence is rarely the best way to establish or evaluate policy for a large nation.

Yet, unemployment still averaged 20% for 7 years.

Yes I wasn't arguing with that. That is the macro view of economic times during the advent of the "New Deal" economics; i.e. FDR's version of keynesianism. The big picture is what you look at re the effects of economic policy and not to the anecdotal incident in which somebody received help and therefore deems the system good.

That is one of the most damning aspects of keynesian economics, American style. It takes from some taxpayers in order to feed an ever growing, ever more bloated, ever more inefficient, ineffective, authoritarian and hungry federal government/bureaucracy and just enough extra to funnel bribe money to enough people to ensure that the government will be allowed to continue unimpeded by much, if any, resistance from the people.

Even many receiving the doled out assistance deplore the growing deficits and unsustainable debt. But not enough to forego that government benefit. They just shut out the warnings that once government has all the power and the people can no longer resist it, they will no longer be of any use to that government. Thus there will be little reason for the government to continue that subsidy.

 

[boedicca]

Keynes is the Manmade Global Warming Theory of Economics. It's never worked in real life, not even once but its adherents will defend it to the death of the US economy

And Obamanomics combines Keynesianism and AGW! Let's go into massive debt to fund "green" energy jobs!

 

[Foxfyre]

It is interesting to go back to an analysis of the U.S. budget, deficits, and effects of the economy at CATO in 1982--this was after the initial Reagan tax increases and before supply side went into effect:

I think you have a slip here. The 1981 tax act was a full-throated tax cut. The 1982, 1983, and 1986 acts were tax increases, mainly by pullbacks on things like depreciation and broadening the tax base by, for example, taxing Social Security benefits and unemployment insurance which had previously been nontaxable and changing the rules on taxing pension income.

By 1996 CATO published this re Reaganomics:

I would agree that in 1982 and 1996 the Cato Institute waxed eloquent about the economic accomplishments of the Reagan years.

But then in 2013, backing up the Forbes report previously posted, the Laffer Center publishes:

Yet in the roughly 30 years from the 1980s through the first decade of the new century, supply-side ideas contributed to the longest boom in United States history and an incredible transformation of the world economy.

According to the National Bureau of Economic Research, 1982-1999 was one continuous mega-economic expansion. In fact, as it stretched into 2007, this 25 Year Boom saw a tripling in the net wealth of U.S. households and businesses from $20 trillion in 1981 to $60 trillion by 2007. When adjusted for inflation, more wealth was created in this 25 year boom than in the previous 200 years.

OK, according to the Laffer Center using NBER statistics, we had a great 25 year run in the Reagan, Bush 41, Clinton, and early Bush 43 years. What conclusion are you trying to draw from that? The period was one of predominantly Keynesian monetary policy by the Fed, sometimes Keynesian and sometimes "supply-side" fiscal policies, and a monotonic start-and-stop policy of deregulation. How do you apportion that success among those disparate policies?

I stand corrected on the 1981 tax changes and you're right. The thing was that just like the Bush 43 tax reforms, they were phased in over two or more years so it was awhile before we saw their full effect:

- phased-in 23% cut in individual tax rates over 3 years; top rate dropped from 70% to 50%
- accelerated depreciation deductions; replaced depreciation system with ACRS
- indexed individual income tax parameters (beginning in 1985)
- created 10% exclusion on income for two-earner married couples ($3,000 cap)
- phased-in increase in estate tax exemption from $175,625 to $600,000 in 1987
- reduced windfall profit taxes
- allowed all working taxpayers to establish IRAs
- expanded provisions for employee stock ownership plans (ESOPs)
- replaced $200 interest exclusion with 15% net interest exclusion ($900 cap) (begin in 1985)
Source - Wiki

And because of swelling deficits--deficits that would be petty cash funds to some of our bureaucracies today--he subsequently signed off on:

The accelerated depreciation changes were repealed by Tax Equity and Fiscal Responsibility Act of 1982 and the 15% interest exclusion repealed before it took effect by the Deficit Reduction Act of 1984.

In 1983, Social Security reform legislation that, among other things, accelerated an increase in the payroll tax rate, required that higher-income beneficiaries pay income tax on part of their benefits, and required the self-employed to pay the full payroll tax rate, rather than just the portion normally paid by employees.

The tax reform of 1986, meanwhile, wasn't designed to increase federal tax revenue. But that didn't mean that no one's taxes went up. Because the reform bill eliminated or reduced many tax breaks and shelters, high-income tax filers who previously paid little ended up with bigger tax bills.
(Source - CNN Money)

Now as for supply side vs keynesian influence during that 30 year boom? I haven't compiled all the data and run any models so I am as dependent on the work of others as you or anybody else is. For myself I know how tough it was before Reagan. Carter literally drove me from the Democratic Party and into the arms of the Republicans. I have always been an avid student of history and I began evaluating the legacy of the FDR years and what has slowly but certainly happened to my country since.

I have watched first hand, up close and personal, the results of supply side economics versus the results of FDR style keynesianism are striking in their differences. And I became a committed supply sider as I attribute keynesianism, in the form of government bribes, to be the single most corrupting element in our country today, both in those in government and those who have been made dependent on it.

 

[oldfart]

Yes I wasn't arguing with that. That is the macro view of economic times during the advent of the "New Deal" economics; i.e. FDR's version of keynesianism. The big picture is what you look at re the effects of economic policy and not to the anecdotal incident in which somebody received help and therefore deems the system good.

That is one of the most damning aspects of keynesian economics, American style. It takes from some taxpayers in order to feed an ever growing, ever more bloated, ever more inefficient, ineffective, authoritarian and hungry federal government/bureaucracy and just enough extra to funnel bribe money to enough people to ensure that the government will be allowed to continue unimpeded by much, if any, resistance from the people.

Even many receiving the doled out assistance deplore the growing deficits and unsustainable debt. But not enough to forego that government benefit. They just shut out the warnings that once government has all the power and the people can no longer resist it, they will no longer be of any use to that government. Thus there will be little reason for the government to continue that subsidy.

I labored without success to find an economic argument in your political rant. Is there one?

 

[jasonnfree]

FDR averaged 20% unemployment from his inauguration until Hitler conquered France 7 years later, whats so great about that? How did that help the middle class?

We either look at it from the macro perspective of overall policy and results, or we attempt to compress that to fit our perception based on personal history or experience. While both are valid in evaluating anything, our own experience or any other anecdotal evidence is rarely the best way to establish or evaluate policy for a large nation.

Yet, unemployment still averaged 20% for 7 years.

unemployment was down to around 14% in 1937, then roosevelt pulled back on the stimulus. Remember, unemployment was officialy 25% when roosevelt took over. It took a while to raise the country out of the jam republicans put it in. Same job obama had after bush wrecked our economy. Obama's stimulus, too small and he had trouble with repubs swearing to stop any success he might have. By the way, WW2 was an enormous stimulus and then full employment. Proof that stimulus works although inflation can rear it's head.

I named some of the programs roosevelt started that benefited our country like social security and tva. What do republicans ever offer but tax cuts for the rich. Ike did build the highways and I haven't seen any complaints about that.

 

[regent]

We either look at it from the macro perspective of overall policy and results, or we attempt to compress that to fit our perception based on personal history or experience. While both are valid in evaluating anything, our own experience or any other anecdotal evidence is rarely the best way to establish or evaluate policy for a large nation.

Yet, unemployment still averaged 20% for 7 years.

unemployment was down to around 14% in 1937, then roosevelt pulled back on the stimulus. Remember, unemployment was officialy 25% when roosevelt took over. It took a while to raise the country out of the jam republicans put it in. Same job obama had after bush wrecked our economy. Obama's stimulus, too small and he had trouble with repubs swearing to stop any success he might have. By the way, WW2 was an enormous stimulus and then full employment. Proof that stimulus works although inflation can rear it's head.

I named some of the programs roosevelt started that benefited our country like social security and tva. What do republicans ever offer but tax cuts for the rich. Ike did build the highways and I haven't seen any complaints about that.

One of the reasons FDR withdrew much of the stimulus in 1936 was he and others were afraid of wrecking the economy again by too much prosperity in such a short time, but as they learned the withdraw was too quick. We must remember there were, and are, no manuals or instruction books on how to cure a depression. FDR experimented, tried this and that and hoped. But when the smoke had cleared America had changed with those FDR programs mentioned, perhaps forever.

 

[CrusaderFrank]

We either look at it from the macro perspective of overall policy and results, or we attempt to compress that to fit our perception based on personal history or experience. While both are valid in evaluating anything, our own experience or any other anecdotal evidence is rarely the best way to establish or evaluate policy for a large nation.

Yet, unemployment still averaged 20% for 7 years.

unemployment was down to around 14% in 1937, then roosevelt pulled back on the stimulus. Remember, unemployment was officialy 25% when roosevelt took over. It took a while to raise the country out of the jam republicans put it in. Same job obama had after bush wrecked our economy. Obama's stimulus, too small and he had trouble with repubs swearing to stop any success he might have. By the way, WW2 was an enormous stimulus and then full employment. Proof that stimulus works although inflation can rear it's head.

I named some of the programs roosevelt started that benefited our country like social security and tva. What do republicans ever offer but tax cuts for the rich. Ike did build the highways and I haven't seen any complaints about that.

No, sorry, FDR didn't "Pull back the stimulus"

In 1937, he doubled down on his Jihad on the US economy by confiscating gold and proposing an "Undistributed profits" tax.

 

[Toro]

No, sorry, FDR didn't "Pull back the stimulus"

What do you call a 17% cut in spending and a big tax hike, Frank? "Stimulus?"

By 1937, President Roosevelt and the Federal Reserve thought self-sustaining growth had been restored and began worrying about unwinding the fiscal and monetary stimulus, which they thought would become a drag on growth and a source of inflation. There was also a strong desire to return to normality, in both monetary and fiscal policy.

On the fiscal side, Roosevelt was under pressure from his Treasury secretary, Henry Morgenthau, to balance the budget. Like many conservatives today, Mr. Morgenthau worried obsessively about business confidence and was convinced that balancing the budget would be expansionary. In the words of the historian John Morton Blum, Mr. Morgenthau said he believed recovery “depended on the willingness of business to increase investments, and this in turn was a function of business confidence,” adding, “In his view only a balanced budget could sustain that confidence.”

Roosevelt ordered a very big cut in federal spending in early 1937, and it fell to $7.6 billion in 1937 and $6.8 billion in 1938 from $8.2 billion in 1936, a 17 percent reduction over two years.

At the same time, taxes increased sharply because of the introduction of the payroll tax. Federal revenues rose to $5.4 billion in 1937 and $6.7 billion in 1938, from $3.9 billion in 1936, an increase of 72 percent. As a consequence, the federal deficit fell from 5.5 percent of G.D.P. in 1936 to a mere 0.5 percent in 1938. The deficit was just $89 million in 1938.

http://economix.blogs.nytimes.com/2011/07/12/are-we-about-to-repeat-the-mistakes-of-1937/?_r=0


The Fed also pulled back on stimulus.

At the same time, the Federal Reserve was alarmed by inflation rates that were high by historical standards, as well as by the large amount of reserves in the banking system, which could potentially fuel a further rise in inflation. Using powers recently granted by the Banking Act of 1935, the Fed doubled reserve requirements from August 1936 to May 1937. Higher reserve requirements restricted the amount of money banks could lend and caused them to tighten credit.

This combination of fiscal and monetary tightening – which conservatives advocate today – brought on a sharp recession beginning in May 1937 and ending in June 1938, according to the National Bureau of Economic Research. Real G.D.P. fell 3.4 percent in 1938, and the unemployment rate rose to 12.5 percent from 9.2 percent in 1937.

And the stock market fell by 50%.

If that happened today, conservatives would blame Obama.

In 1937, he doubled down on his Jihad on the US economy by confiscating gold and proposing an "Undistributed profits" tax.

He confiscated gold in 1933, not 1937.

Executive Order 6102 - Wikipedia, the free encyclopedia

He also devalued the dollar against gold. Countries that went off the gold standard or devalued gold recovered sooner from the Depression.

The undistributed tax on profits was introduced in 1936 and was 27%. It was abolished in 1939.

http://en.wikipedia.org/wiki/Undistributed_profits_tax

 

[Foxfyre]

No, sorry, FDR didn't "Pull back the stimulus"

What do you call a 17% cut in spending and a big tax hike, Frank? "Stimulus?"

By 1937, President Roosevelt and the Federal Reserve thought self-sustaining growth had been restored and began worrying about unwinding the fiscal and monetary stimulus, which they thought would become a drag on growth and a source of inflation. There was also a strong desire to return to normality, in both monetary and fiscal policy.

On the fiscal side, Roosevelt was under pressure from his Treasury secretary, Henry Morgenthau, to balance the budget. Like many conservatives today, Mr. Morgenthau worried obsessively about business confidence and was convinced that balancing the budget would be expansionary. In the words of the historian John Morton Blum, Mr. Morgenthau said he believed recovery “depended on the willingness of business to increase investments, and this in turn was a function of business confidence,” adding, “In his view only a balanced budget could sustain that confidence.”

Roosevelt ordered a very big cut in federal spending in early 1937, and it fell to $7.6 billion in 1937 and $6.8 billion in 1938 from $8.2 billion in 1936, a 17 percent reduction over two years.

At the same time, taxes increased sharply because of the introduction of the payroll tax. Federal revenues rose to $5.4 billion in 1937 and $6.7 billion in 1938, from $3.9 billion in 1936, an increase of 72 percent. As a consequence, the federal deficit fell from 5.5 percent of G.D.P. in 1936 to a mere 0.5 percent in 1938. The deficit was just $89 million in 1938.

http://economix.blogs.nytimes.com/2011/07/12/are-we-about-to-repeat-the-mistakes-of-1937/?_r=0


The Fed also pulled back on stimulus.

At the same time, the Federal Reserve was alarmed by inflation rates that were high by historical standards, as well as by the large amount of reserves in the banking system, which could potentially fuel a further rise in inflation. Using powers recently granted by the Banking Act of 1935, the Fed doubled reserve requirements from August 1936 to May 1937. Higher reserve requirements restricted the amount of money banks could lend and caused them to tighten credit.

This combination of fiscal and monetary tightening – which conservatives advocate today – brought on a sharp recession beginning in May 1937 and ending in June 1938, according to the National Bureau of Economic Research. Real G.D.P. fell 3.4 percent in 1938, and the unemployment rate rose to 12.5 percent from 9.2 percent in 1937.

And the stock market fell by 50%.

If that happened today, conservatives would blame Obama.

In 1937, he doubled down on his Jihad on the US economy by confiscating gold and proposing an "Undistributed profits" tax.

He confiscated gold in 1933, not 1937.

Executive Order 6102 - Wikipedia, the free encyclopedia

He also devalued the dollar against gold. Countries that went off the gold standard or devalued gold recovered sooner from the Depression.

The undistributed tax on profits was introduced in 1936 and was 27%. It was abolished in 1939.

Undistributed profits tax - Wikipedia, the free encyclopedia

They would blame Obama? Are you sure? So far they have been successfully blaming Bush for every negative that has happened during the Obama administration. Of course Obama takes the credit when the news is at all good. Just as FDR's apologists seem desperate to keep him as an economic hero.

However, honest economists without an ax to grind now almost ALL admit that FDR's keynesian efforts to spend the nation back into prosperity failed miserably for the most part and only prolonged the pain. Will history be any more kind to Obama?