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Republican Keynesians?

By JLP | May 29, 2012

Interesting article by Bruce Bartlett:

Republican Keynesians

According to Bartlett, Republicans are anti-Keynesians until they are running for office.

Quote from the piece:

In 2001, George W. Bush responded to the recession that began in March by proposing another tax rebate of $300 to $600, even though extensive research by the economists Alan Blinder and Franco Modigliani and Charles Steindel showed that the 1975 rebate had very little impact on growth.

Are tax rebates “Keynesian”? I supppose they are if they aren’t accompanied by cuts in spending elsewhere. Like the article mentioned, I also wondered about the effectiveness of one time rebates in stimulating the economy. It seems to me we need long-term solutions that provide stability and help people make long-term choices. That can’t be done with an extra $300.

Topics: Economics | 6 Comments »


6 Responses to “Republican Keynesians?”

  1. Jack Says:
    May 29th, 2012 at 12:23 pm

    Well, they are HALF Keynesian. That’s like taking a cake recipe and only putting in the first half of the listed ingredients. You’ll get glop, not cake.

    Keynes recommended taking money out of the economy in good years, and putting it back in in the bad years. Without first taking the money out of the economy in good years, a stimulus must take money out of the economy now. And one does not get richer by taking money out of one’s left pocket to put in the right. Worse, in trying to do just that, the government drops some of that money and loses it.

  2. BG Says:
    May 29th, 2012 at 12:57 pm

    The stimulus didn’t take money out of the economy. Those tax rebates were completed funded (and still are) with Debt — just like all the rest of the tax cuts of the past 11 years.

    We are spending money (today) taken from our _future_ economy (via debt).

  3. Jack Says:
    May 29th, 2012 at 2:21 pm

    > Those tax rebates were completed funded
    > (and still are) with Debt

    People have to buy those bonds, BG, which takes that money out of the economy.

  4. BG Says:
    May 31st, 2012 at 9:23 am

    Jack) If the government burned the cash raised from the Bond sales, I would agree with you.

    However, the cash was given back to the people directly in the form of tax-rebate checks (which, I presume the majority was immediately spent back into the economy).

    If I take money out of my left pocket, and put it into my right pocket, it is a wash. The only difference here is the (future) interest payments on those bonds: which will be paid off by a future generation/economy.

  5. Jack Says:
    May 31st, 2012 at 12:57 pm

    I think we are in violent agreement, BG.

    The cash comes from those who buy the bonds. If they did not buy those bonds, they would buy corporate bonds or make some other investments with it. (These people are the left pocket.)

    Then the money is given to the people who might have been hired by those investors. (These people are the right pocket.)

    So it’s a wash, except that the investors probably have better ideas of how to create jobs.

  6. Valkyrie Frost Says:
    June 7th, 2012 at 9:23 am

    I got as far as “According to Bartlett, Republicans are anti-Keynesians until they are running for office.” That sent me right over the edge and I couldn’t stop laughing.

    Jack’s first comment was dead center (IMHO), not just of Republicans, but of 99% of all politicians.

    Over the long view, politicians have not applied Keynesian theory at all, they have simply been applying deficit spending to boost the economy even during boom years (this started JFK). How the money was spent (or justified) has changed from administration to administration, but the results have been the same: Money borrowed and spent on short term goals with no real long term ROI.

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