Quadruple OUCH! White House rules out sequel to stimulus bill

[teapartysamurai]

please explain, in your own words, what Keysenian economics is... then we can read the rest of your OP.

Thank you for proving me right. I said in another thread I now what liberals will say before they say it.

This is another great tactic they play. Making you waste your time "defining" things for them, AS IF IT WERE NOT OBVIOUS.

SINCE WE HAVE BEEN LIVING KEYNESIAN ECONOMICS FOR THE LAST NEAR TWO YEARS, it's kind of obvious isn't it?

It's failing in Europe, it's failing here, but I have to waste time pretending we don't know that?

AS IF this were some classroom exercise AND NOT HARD COLD REALITY FOR EVERYONE.

It's like being in the middle of the 1930's Oklahoma dust bowl and some elitist wants me to define a dust storm instead of the moron just OBSERVING WHAT'S HAPPENING ALL AROUND HIM!

It's hilarious!

we havent been in the keynes system at all. if by two years you mean, since obama took office, than we have solely been in a free for all of spending, which is definitely not supported by the keynes theory of economics. also you can't have one president be a wild spender with tax cuts and then have the next one attempt keynes (which obama hasn't) and except anything to work. throwing keyne's system around whenver you don't like a president's economy policy is pretty stupid.

This is the CLASSIC ARGUMENT of communists.

What he is saying is because communism doesn't follow the "flowchart" or the plan that is EXACTLY ON PAPER for communism, that communism has never really been tried.

The entire premise for this argument is laughable, because it presupposes it's even POSSIBLE to follow true Marxist/communism as written on paper.

It never occurs to them, the plan changes because it ISN'T POSSIBLE TO IMPLEMENT IT as written on paper.

So, now he's saying real Keyesian economics hasn't really been done, because on paper it's different.

Liberals never change. The same arguments over and over again.

 

[blu]

It's all Bush's fault.... how insightful.. and original.
Good grief.

do you know how keynes system was meant to be run? what does the government do in the keynes system was the economy is running strong? compare and contrast that to what bush did

That's like saying because Bush jaywalked and Obama committed murder, they both broke the law so both are the same.

Bush spent too much, YES. But Obama is Bush on STEROIDS when it comes to spending.

Pretty lame liberals!

well you go around bashing keynes when, under his system, when bush was president with a surplus, he would have had the government save most of the money (instead he spent like crazy) and give tax cuts to all people (and the amount would have been the same no matter the income) while when obama came in under a recession he would have first spent the money saved under bush (he had to spend borrowed money instead) and he would have kept the taxes low and possibly lowered them even more (instead he has raised them and there are more raises coming)

there are more examples of how neither of them followed keynes system, but I guess logical thought doesn't meld well with rantings on an Internet message board

carry on

 

[G.T.]

Wow @ how dumb this bitch is. Seriously.

 

[teapartysamurai]

do you know how keynes system was meant to be run? what does the government do in the keynes system was the economy is running strong? compare and contrast that to what bush did

That's like saying because Bush jaywalked and Obama committed murder, they both broke the law so both are the same.

Bush spent too much, YES. But Obama is Bush on STEROIDS when it comes to spending.

Pretty lame liberals!

well you go around bashing keynes when, under his system, when bush was president with a surplus, he would have had the government save most of the money (instead he spent like crazy) and give tax cuts to all people (and the amount would have been the same no matter the income) while when obama came in under a recession he would have first spent the money saved under bush (he had to spend borrowed money instead) and he would have kept the taxes low and possibly lowered them even more (instead he has raised them and there are more raises coming)

there are more examples of how neither of them followed keynes system, but I guess logical thought doesn't meld well with rantings on an Internet message board

carry on

THANK YOU FOR PROVING ME RIGHT!

The classic argument of the communist.

"Well if REAL COMMUNISM HAD BEEN TRIED, this would have happened, and all would have been fluffy puppies and lolliepops!"

But, because in REALITY, it's all crashing and burning, then it can't be "true communism" because communism on paper didn't predict this outcome!

Well, it's the same here. You are telling us what would have happened under this "perfect Keyesian theory," and because it didn't really happen, it can't be Keyesian.

It doesn't occur to you that happy ponies and puppies were never going to rain out of the sky no matter what some theoretician promised on paper. In reality, we see the result.

 

[teapartysamurai]

Wow @ how dumb this bitch is. Seriously.

I think we see who is dumb if that is all you have to contribute.

Pathetic!

 

[G.T.]

Wow @ how dumb this bitch is. Seriously.

I think we see who is dumb if that is all you have to contribute.

Pathetic!

Yea, you're so witty.

How about instead of acting like McCarthy, and instead of acting.....yea, acting, like you know what keynesian economics even is..........................

you explain how-so it's being implemented.

After all, one person showed you how it's *not,* and your only retort was to tell him that it's dumb to ask how it is? Really? This is why you're dumb as fuck, and pointless to talk/discuss with.

You're not here to be an adult, you're here to go RAAAAHHHH RAAAAHHHH I AM TEH GREATEST EVA ABOVE LIBRULS!! with your OCD-ing ass on the capslock button.....meanwhile, no substance. No explanation of your point of view as he had explained his....nooooo. Just call him a communist and think "that works!"

Fucking pussy ass weasel.

 

[Zoom-boing]

Which is another way of saying the Whitehouse admits the other two stimuluses didn't work! The fall of Keysenian economics. Oh the humanity!

President Obama's economic team is looking for ways to accelerate the agonizingly slow economic recovery, but the top White House spokesman on Thursday said a large spending measure is not being considered.

"Some big, new stimulus plan is not in the offing," White House press secretary Robert Gibbs said.



National unemployment numbers for August will be released Friday morning. While administration officials do not yet know what those numbers will reveal, analysts widely expect the national unemployment rate will hover near 10.

The anemic job growth has spurred a number of analysts to call for additional stimulus spending, arguing the $787 billion package passed shortly after Obama took office was too small to have the desired impact.

But Gibbs said flatly that a package resembling the first stimulus is off the table as the president's economic team "is looking at a whole host" of possibilities for "targeted measures" that would speed up the recovery.

White House rules out sequel to stimulus bill - TheHill.com

And they will keep "looking" until AFTER the November elections to see what they can get away with.

This is pretty funny stuff, because it's as much as admitting the stimulus didn't work. The Big F-ing Deal, FDR Style New Deal II has gone down in flames.

Liberalism is being discredited as we watch. No wonder liberals have become so hysterical on this board lately. It must be hard to watch their perfect utopian ideas of big government crash and burn.

Last bolded sentence, the stim package was pay back so of course a package resembling the first stimulus is off the table. I don't believe them, they will just call it something else. btw, the first stim package ended up being something like $860B not the original $787B that Gibbs said. He lied.

 

[teapartysamurai]

Wow @ how dumb this bitch is. Seriously.

I think we see who is dumb if that is all you have to contribute.

Pathetic!

Yea, you're so witty.

How about instead of acting like McCarthy, and instead of acting.....yea, acting, like you know what keynesian economics even is..........................

you explain how-so it's being implemented.

After all, one person showed you how it's *not,* and your only retort was to tell him that it's dumb to ask how it is? Really? This is why you're dumb as fuck, and pointless to talk/discuss with.

You're not here to be an adult, you're here to go RAAAAHHHH RAAAAHHHH I AM TEH GREATEST EVA ABOVE LIBRULS!! with your OCD-ing ass on the capslock button.....meanwhile, no substance. No explanation of your point of view as he had explained his....nooooo. Just call him a communist and think "that works!"

Fucking pussy ass weasel.

Thank you for proving me right!

I just said this in another thread. LIBERALS THINK AND ACT THE SAME.

When their tactics fail, they simply restate the false premies AND CRY YOU BETTER OBEY THEIR DEMANDS!!!!!

But I don't have to define the obvious, since the obvious is all around us.

You too are arguing that it can't be Keyesian economics failing, because it "hasn't really been tried."

Same argument, only now with childish insults and rants thrown in because you are OUTRAGED that I dare point out how laughable is such a tactic.

See how furious they are getting. This is NOTHING. The closer we get to election day and the more OBVIOUS it is their dreams for a utopian european style American are not going to happen, the more FURIOUS and HYSTERICAL they are going to get.

Sit back and watch the fun!

 

[teapartysamurai]

Which is another way of saying the Whitehouse admits the other two stimuluses didn't work! The fall of Keysenian economics. Oh the humanity!

President Obama's economic team is looking for ways to accelerate the agonizingly slow economic recovery, but the top White House spokesman on Thursday said a large spending measure is not being considered.

"Some big, new stimulus plan is not in the offing," White House press secretary Robert Gibbs said.



National unemployment numbers for August will be released Friday morning. While administration officials do not yet know what those numbers will reveal, analysts widely expect the national unemployment rate will hover near 10.

The anemic job growth has spurred a number of analysts to call for additional stimulus spending, arguing the $787 billion package passed shortly after Obama took office was too small to have the desired impact.

But Gibbs said flatly that a package resembling the first stimulus is off the table as the president's economic team "is looking at a whole host" of possibilities for "targeted measures" that would speed up the recovery.

White House rules out sequel to stimulus bill - TheHill.com

And they will keep "looking" until AFTER the November elections to see what they can get away with.

This is pretty funny stuff, because it's as much as admitting the stimulus didn't work. The Big F-ing Deal, FDR Style New Deal II has gone down in flames.

Liberalism is being discredited as we watch. No wonder liberals have become so hysterical on this board lately. It must be hard to watch their perfect utopian ideas of big government crash and burn.

Last bolded sentence, the stim package was pay back so of course a package resembling the first stimulus is off the table. I don't believe them, they will just call it something else. btw, the first stim package ended up being something like $860B not the original $787B that Gibbs said. He lied.

Yep, I think you right as Willow pointed out.

They will just find another name for it, and try it again.

 

[johnrocks]

Wow, Krugman must feel like the Maytag repairman right now.

 

[8537]

[

This is another great tactic they play. Making you waste your time "defining" things for them, AS IF IT WERE NOT OBVIOUS.

SINCE WE HAVE BEEN LIVING KEYNESIAN ECONOMICS FOR THE LAST NEAR TWO YEARS, it's kind of obvious isn't it?

Oh bejeebers that's stupid.

 

[blu]

That's like saying because Bush jaywalked and Obama committed murder, they both broke the law so both are the same.

Bush spent too much, YES. But Obama is Bush on STEROIDS when it comes to spending.

Pretty lame liberals!

well you go around bashing keynes when, under his system, when bush was president with a surplus, he would have had the government save most of the money (instead he spent like crazy) and give tax cuts to all people (and the amount would have been the same no matter the income) while when obama came in under a recession he would have first spent the money saved under bush (he had to spend borrowed money instead) and he would have kept the taxes low and possibly lowered them even more (instead he has raised them and there are more raises coming)

there are more examples of how neither of them followed keynes system, but I guess logical thought doesn't meld well with rantings on an Internet message board

carry on

THANK YOU FOR PROVING ME RIGHT!

The classic argument of the communist.

"Well if REAL COMMUNISM HAD BEEN TRIED, this would have happened, and all would have been fluffy puppies and lolliepops!"

But, because in REALITY, it's all crashing and burning, then it can't be "true communism" because communism on paper didn't predict this outcome!

Well, it's the same here. You are telling us what would have happened under this "perfect Keyesian theory," and because it didn't really happen, it can't be Keyesian.

It doesn't occur to you that happy ponies and puppies were never going to rain out of the sky no matter what some theoretician promised on paper. In reality, we see the result.

what im telling you is that you are running around the board bashing keynes when it was not even close to being in use. same thing for those who blame the recession on capitalism. I wouldn't expect you to have a deep understanding of any economic system though so I believe I am wasting my time

 

[Valerie]

Aaah you might note that Obama was elected on November 4, 2008 and took office in January 2009.

On October 1, 2008, the Senate debated and voted on an amendment to H.R. 1424, which substituted a newly revised version of the Emergency Economic Stabilization Act of 2008 for the language of H.R. 1424.[6][7] The Senate accepted the amendment and passed the entire amended bill, voting 74-25.[8] Additional unrelated provisions added an estimated $150 billion to the cost of the package and increased the length of the bill to 451 pages.[9][10] (See Public Law 110-343 for details on the added provisions.) The amended version of H.R. 1424 was sent to the House for consideration, and on October 3, the House voted 263-171 to enact the bill into law.[6][11][12] President George W. Bush signed the bill into law within hours of its congressional enactment, creating the $700 billion Troubled Asset Relief Program (TARP) to purchase failing bank assets.[13]

Supporters of the plan argued that the market intervention called for by the plan was vital to prevent further erosion of confidence in the U.S. credit markets and that failure to act could lead to an economic depression. Opponents objected to the plan's cost and rapidity, pointing to polls that showed little support among the public for "bailing out" Wall Street investment banks,[14] claimed that better alternatives were not considered,[15] and that the Senate forced passage of the unpopular version through the opposing house by "sweetening" the bailout package.[16]
Emergency Economic Stabilization Act of 2008 - Wikipedia, the free encyclopedia

The $787 billion economic stimulus package was approved by Congress in February, 2009. The plan was to jumpstart economic growth, and save between 900,000 - 2.3 million jobs. The economic stimulus bill allocated funds as follows:

* $288 billion in tax cuts.
* $224 billion in extended unemployment benefits, education and health care.
* $275 billion for job creation using federal contracts, grants and loans.

For more detail, see Economic Stimulus Package in Detail.
Economic Stimulus Bill - Economic Stimulus Package - Obama Economic Stimulus Package

 

[Valerie]

please explain, in your own words, what Keysenian economics is... then we can read the rest of your OP.

All jokes about samurai spelling aside...

Keynesian economics is a theory of total spending in the economy (called aggregate demand) and its effects on output and inflation. Although the term has been used (and abused) to describe many things over the years, six principal tenets seem central to Keynesianism. The first three describe how the economy works.

1. A Keynesian believes that aggregate demand is influenced by a host of economic decisions—both public and private—and sometimes behaves erratically. The public decisions include, most prominently, those on monetary and fiscal (i.e., spending and tax) policies. Some decades ago, economists heatedly debated the relative strengths of monetary and fiscal policies, with some Keynesians arguing that monetary policy is powerless, and some monetarists arguing that fiscal policy is powerless. Both of these are essentially dead issues today. Nearly all Keynesians and monetarists now believe that both fiscal and monetary policies affect aggregate demand. A few economists, however, believe in debt neutrality—the doctrine that substitutions of government borrowing for taxes have no effects on total demand (more on this below).

2. According to Keynesian theory, changes in aggregate demand, whether anticipated or unanticipated, have their greatest short-run effect on real output and employment, not on prices. This idea is portrayed, for example, in phillips curves that show inflation rising only slowly when unemployment falls. Keynesians believe that what is true about the short run cannot necessarily be inferred from what must happen in the long run, and we live in the short run. They often quote Keynes’s famous statement, “In the long run, we are all dead,” to make the point.

Monetary policy can produce real effects on output and employment only if some prices are rigid—if nominal wages (wages in dollars, not in real purchasing power), for example, do not adjust instantly. Otherwise, an injection of new money would change all prices by the same percentage. So Keynesian models generally either assume or try to explain rigid prices or wages. Rationalizing rigid prices is a difficult theoretical problem because, according to standard microeconomic theory, real supplies and demands should not change if all nominal prices rise or fall proportionally.

But Keynesians believe that, because prices are somewhat rigid, fluctuations in any component of spending—consumption, investment, or government expenditures—cause output to fluctuate. If government spending increases, for example, and all other components of spending remain constant, then output will increase. Keynesian models of economic activity also include a so-called multiplier effect; that is, output increases by a multiple of the original change in spending that caused it. Thus, a ten-billion-dollar increase in government spending could cause total output to rise by fifteen billion dollars (a multiplier of 1.5) or by five billion (a multiplier of 0.5). Contrary to what many people believe, Keynesian analysis does not require that the multiplier exceed 1.0. For Keynesian economics to work, however, the multiplier must be greater than zero.

3. Keynesians believe that prices, and especially wages, respond slowly to changes in supply and demand, resulting in periodic shortages and surpluses, especially of labor. Even Milton Friedman acknowledged that “under any conceivable institutional arrangements, and certainly under those that now prevail in the United States, there is only a limited amount of flexibility in prices and wages.”1 In current parlance, that would certainly be called a Keynesian position.

No policy prescriptions follow from these three beliefs alone. And many economists who do not call themselves Keynesian would nevertheless accept the entire list. What distinguishes Keynesians from other economists is their belief in the following three tenets about economic policy.

4. Keynesians do not think that the typical level of unemployment is ideal—partly because unemployment is subject to the caprice of aggregate demand, and partly because they believe that prices adjust only gradually. In fact, Keynesians typically see unemployment as both too high on average and too variable, although they know that rigorous theoretical justification for these positions is hard to come by. Keynesians also feel certain that periods of recession or depression are economic maladies, not, as in real business cycle theory, efficient market responses to unattractive opportunities.

5. Many, but not all, Keynesians advocate activist stabilization policy to reduce the amplitude of the business cycle, which they rank among the most important of all economic problems. Here, however, even some conservative Keynesians part company by doubting either the efficacy of stabilization policy or the wisdom of attempting it.

This does not mean that Keynesians advocate what used to be called fine-tuning—adjusting government spending, taxes, and the money supply every few months to keep the economy at full employment. Almost all economists, including most Keynesians, now believe that the government simply cannot know enough soon enough to fine-tune successfully. Three lags make it unlikely that fine-tuning will work. First, there is a lag between the time that a change in policy is required and the time that the government recognizes this. Second, there is a lag between when the government recognizes that a change in policy is required and when it takes action. In the United States, this lag can be very long for fiscal policy because Congress and the administration must first agree on most changes in spending and taxes. The third lag comes between the time that policy is changed and when the changes affect the economy. This, too, can be many months. Yet many Keynesians still believe that more modest goals for stabilization policy—coarse-tuning, if you will—are not only defensible but sensible. For example, an economist need not have detailed quantitative knowledge of lags to prescribe a dose of expansionary monetary policy when the unemployment rate is very high.

6. Finally, and even less unanimously, some Keynesians are more concerned about combating unemployment than about conquering inflation. They have concluded from the evidence that the costs of low inflation are small. However, there are plenty of anti-inflation Keynesians. Most of the world’s current and past central bankers, for example, merit this title whether they like it or not. Needless to say, views on the relative importance of unemployment and inflation heavily influence the policy advice that economists give and that policymakers accept. Keynesians typically advocate more aggressively expansionist policies than non-Keynesians.

Keynesians’ belief in aggressive government action to stabilize the economy is based on value judgments and on the beliefs that (a) macroeconomic fluctuations significantly reduce economic well-being and (b) the government is knowledgeable and capable enough to improve on the free market.

The brief debate between Keynesians and new classical economists in the 1980s was fought primarily over (a) and over the first three tenets of Keynesianism—tenets the monetarists had accepted. New classicals believed that anticipated changes in the money supply do not affect real output; that markets, even the labor market, adjust quickly to eliminate shortages and surpluses; and that business cycles may be efficient. For reasons that will be made clear below, I believe that the “objective” scientific evidence on these matters points strongly in the Keynesian direction. In the 1990s, the new classical schools also came to accept the view that prices are sticky and that, therefore, the labor market does not adjust as quickly as they previously thought (see new classical macroeconomics).

Before leaving the realm of definition, I must underscore several glaring and intentional omissions.

First, I have said nothing about the rational expectations school of thought. Like Keynes himself, many Keynesians doubt that school’s view that people use all available information to form their expectations about economic policy. Other Keynesians accept the view. But when it comes to the large issues with which I have concerned myself, nothing much rides on whether or not expectations are rational. Rational expectations do not, for example, preclude rigid prices; rational expectations models with sticky prices are thoroughly Keynesian by my definition. I should note, though, that some new classicals see rational expectations as much more fundamental to the debate.

The second omission is the hypothesis that there is a “natural rate” of unemployment in the long run. Prior to 1970, Keynesians believed that the long-run level of unemployment depended on government policy, and that the government could achieve a low unemployment rate by accepting a high but steady rate of inflation. In the late 1960s, Milton Friedman, a monetarist, and Columbia’s Edmund Phelps, a Keynesian, rejected the idea of such a long-run trade-off on theoretical grounds. They argued that the only way the government could keep unemployment below what they called the “natural rate” was with macroeconomic policies that would continuously drive inflation higher and higher. In the long run, they argued, the unemployment rate could not be below the natural rate. Shortly thereafter, Keynesians like Northwestern’s Robert Gordon presented empirical evidence for Friedman’s and Phelps’s view. Since about 1972 Keynesians have integrated the “natural rate” of unemployment into their thinking. So the natural rate hypothesis played essentially no role in the intellectual ferment of the 1975–1985 period.

Third, I have ignored the choice between monetary and fiscal policy as the preferred instrument of stabilization policy. Economists differ about this and occasionally change sides. By my definition, however, it is perfectly possible to be a Keynesian and still believe either that responsibility for stabilization policy should, in principle, be ceded to the monetary authority or that it is, in practice, so ceded. In fact, most Keynesians today share one or both of those beliefs.

Keynesian theory was much denigrated in academic circles from the mid-1970s until the mid-1980s. It has staged a strong comeback since then, however. The main reason appears to be that Keynesian economics was better able to explain the economic events of the 1970s and 1980s than its principal intellectual competitor, new classical economics.

True to its classical roots, new classical theory emphasizes the ability of a market economy to cure recessions by downward adjustments in wages and prices. The new classical economists of the mid-1970s attributed economic downturns to people’s misperceptions about what was happening to relative prices (such as real wages). Misperceptions would arise, they argued, if people did not know the current price level or inflation rate. But such misperceptions should be fleeting and surely cannot be large in societies in which price indexes are published monthly and the typical monthly inflation rate is less than 1 percent. Therefore, economic downturns, by the early new classical view, should be mild and brief. Yet, during the 1980s most of the world’s industrial economies endured deep and long recessions. Keynesian economics may be theoretically untidy, but it certainly predicts periods of persistent, involuntary unemployment.

According to the early new classical theorists of the 1970s and 1980s, a correctly perceived decrease in the growth of the money supply should have only small effects, if any, on real output. Yet, when the Federal Reserve and the Bank of England announced that monetary policy would be tightened to fight inflation, and then made good on their promises, severe recessions followed in each country. New classicals might claim that the tightening was unanticipated (because people did not believe what the monetary authorities said). Perhaps it was, in part. But surely the broad contours of the restrictive policies were anticipated, or at least correctly perceived as they unfolded. Old-fashioned Keynesian theory, which says that any monetary restriction is contractionary because firms and individuals are locked into fixed-price contracts, not inflation-adjusted ones, seems more consistent with actual events.

An offshoot of new classical theory formulated by Harvard’s Robert Barro is the idea of debt neutrality (see government debt and deficits). Barro argues that inflation, unemployment, real GNP, and real national saving should not be affected by whether the government finances its spending with high taxes and low deficits or with low taxes and high deficits. Because people are rational, he argues, they will correctly perceive that low taxes and high deficits today must mean higher future taxes for them and their heirs. They will, Barro argues, cut consumption and increase their saving by one dollar for each dollar increase in future tax liabilities. Thus, a rise in private saving should offset any increase in the government’s deficit. Naïve Keynesian analysis, by contrast, sees an increased deficit, with government spending held constant, as an increase in aggregate demand. If, as happened in the United States in the early 1980s, the stimulus to demand is nullified by contractionary monetary policy, real interest rates should rise strongly. There is no reason, in the Keynesian view, to expect the private saving rate to rise.

The massive U.S. tax cuts between 1981 and 1984 provided something approximating a laboratory test of these alternative views. What happened? The private saving rate did not rise. Real interest rates soared. With fiscal stimulus offset by monetary contraction, real GNP growth was approximately unaffected; it grew at about the same rate as it had in the recent past. Again, this all seems more consistent with Keynesian than with new classical theory.

Finally, there was the European depression of the 1980s, the worst since the depression of the 1930s. The Keynesian explanation is straightforward. Governments, led by the British and German central banks, decided to fight inflation with highly restrictive monetary and fiscal policies. The anti-inflation crusade was strengthened by the European monetary system, which, in effect, spread the stern German monetary policy all over Europe. The new classical school has no comparable explanation. New classicals, and conservative economists in general, argue that European governments interfere more heavily in labor markets (with high unemployment benefits, for example, and restrictions on firing workers). But most of these interferences were in place in the early 1970s, when unemployment was extremely low.
Keynesian Economics: The Concise Encyclopedia of Economics | Library of Economics and Liberty

 

[8537]

please explain, in your own words, what Keysenian economics is... then we can read the rest of your OP.

All jokes about samurai spelling aside...

Keynesian economics is a theory of total spending in the economy (called aggregate demand) and its effects on output and inflation. Although the term has been used (and abused) to describe many things over the years, six principal tenets seem central to Keynesianism. The first three describe how the economy works.

1. A Keynesian believes that aggregate demand is influenced by a host of economic decisions—both public and private—and sometimes behaves erratically. The public decisions include, most prominently, those on monetary and fiscal (i.e., spending and tax) policies. Some decades ago, economists heatedly debated the relative strengths of monetary and fiscal policies, with some Keynesians arguing that monetary policy is powerless, and some monetarists arguing that fiscal policy is powerless. Both of these are essentially dead issues today. Nearly all Keynesians and monetarists now believe that both fiscal and monetary policies affect aggregate demand. A few economists, however, believe in debt neutrality—the doctrine that substitutions of government borrowing for taxes have no effects on total demand (more on this below).

2. According to Keynesian theory, changes in aggregate demand, whether anticipated or unanticipated, have their greatest short-run effect on real output and employment, not on prices. This idea is portrayed, for example, in phillips curves that show inflation rising only slowly when unemployment falls. Keynesians believe that what is true about the short run cannot necessarily be inferred from what must happen in the long run, and we live in the short run. They often quote Keynes’s famous statement, “In the long run, we are all dead,” to make the point.

Monetary policy can produce real effects on output and employment only if some prices are rigid—if nominal wages (wages in dollars, not in real purchasing power), for example, do not adjust instantly. Otherwise, an injection of new money would change all prices by the same percentage. So Keynesian models generally either assume or try to explain rigid prices or wages. Rationalizing rigid prices is a difficult theoretical problem because, according to standard microeconomic theory, real supplies and demands should not change if all nominal prices rise or fall proportionally.

But Keynesians believe that, because prices are somewhat rigid, fluctuations in any component of spending—consumption, investment, or government expenditures—cause output to fluctuate. If government spending increases, for example, and all other components of spending remain constant, then output will increase. Keynesian models of economic activity also include a so-called multiplier effect; that is, output increases by a multiple of the original change in spending that caused it. Thus, a ten-billion-dollar increase in government spending could cause total output to rise by fifteen billion dollars (a multiplier of 1.5) or by five billion (a multiplier of 0.5). Contrary to what many people believe, Keynesian analysis does not require that the multiplier exceed 1.0. For Keynesian economics to work, however, the multiplier must be greater than zero.

3. Keynesians believe that prices, and especially wages, respond slowly to changes in supply and demand, resulting in periodic shortages and surpluses, especially of labor. Even Milton Friedman acknowledged that “under any conceivable institutional arrangements, and certainly under those that now prevail in the United States, there is only a limited amount of flexibility in prices and wages.”1 In current parlance, that would certainly be called a Keynesian position.

No policy prescriptions follow from these three beliefs alone. And many economists who do not call themselves Keynesian would nevertheless accept the entire list. What distinguishes Keynesians from other economists is their belief in the following three tenets about economic policy.

4. Keynesians do not think that the typical level of unemployment is ideal—partly because unemployment is subject to the caprice of aggregate demand, and partly because they believe that prices adjust only gradually. In fact, Keynesians typically see unemployment as both too high on average and too variable, although they know that rigorous theoretical justification for these positions is hard to come by. Keynesians also feel certain that periods of recession or depression are economic maladies, not, as in real business cycle theory, efficient market responses to unattractive opportunities.

5. Many, but not all, Keynesians advocate activist stabilization policy to reduce the amplitude of the business cycle, which they rank among the most important of all economic problems. Here, however, even some conservative Keynesians part company by doubting either the efficacy of stabilization policy or the wisdom of attempting it.

This does not mean that Keynesians advocate what used to be called fine-tuning—adjusting government spending, taxes, and the money supply every few months to keep the economy at full employment. Almost all economists, including most Keynesians, now believe that the government simply cannot know enough soon enough to fine-tune successfully. Three lags make it unlikely that fine-tuning will work. First, there is a lag between the time that a change in policy is required and the time that the government recognizes this. Second, there is a lag between when the government recognizes that a change in policy is required and when it takes action. In the United States, this lag can be very long for fiscal policy because Congress and the administration must first agree on most changes in spending and taxes. The third lag comes between the time that policy is changed and when the changes affect the economy. This, too, can be many months. Yet many Keynesians still believe that more modest goals for stabilization policy—coarse-tuning, if you will—are not only defensible but sensible. For example, an economist need not have detailed quantitative knowledge of lags to prescribe a dose of expansionary monetary policy when the unemployment rate is very high.

6. Finally, and even less unanimously, some Keynesians are more concerned about combating unemployment than about conquering inflation. They have concluded from the evidence that the costs of low inflation are small. However, there are plenty of anti-inflation Keynesians. Most of the world’s current and past central bankers, for example, merit this title whether they like it or not. Needless to say, views on the relative importance of unemployment and inflation heavily influence the policy advice that economists give and that policymakers accept. Keynesians typically advocate more aggressively expansionist policies than non-Keynesians.

Keynesians’ belief in aggressive government action to stabilize the economy is based on value judgments and on the beliefs that (a) macroeconomic fluctuations significantly reduce economic well-being and (b) the government is knowledgeable and capable enough to improve on the free market.

The brief debate between Keynesians and new classical economists in the 1980s was fought primarily over (a) and over the first three tenets of Keynesianism—tenets the monetarists had accepted. New classicals believed that anticipated changes in the money supply do not affect real output; that markets, even the labor market, adjust quickly to eliminate shortages and surpluses; and that business cycles may be efficient. For reasons that will be made clear below, I believe that the “objective” scientific evidence on these matters points strongly in the Keynesian direction. In the 1990s, the new classical schools also came to accept the view that prices are sticky and that, therefore, the labor market does not adjust as quickly as they previously thought (see new classical macroeconomics).

Before leaving the realm of definition, I must underscore several glaring and intentional omissions.

First, I have said nothing about the rational expectations school of thought. Like Keynes himself, many Keynesians doubt that school’s view that people use all available information to form their expectations about economic policy. Other Keynesians accept the view. But when it comes to the large issues with which I have concerned myself, nothing much rides on whether or not expectations are rational. Rational expectations do not, for example, preclude rigid prices; rational expectations models with sticky prices are thoroughly Keynesian by my definition. I should note, though, that some new classicals see rational expectations as much more fundamental to the debate.

The second omission is the hypothesis that there is a “natural rate” of unemployment in the long run. Prior to 1970, Keynesians believed that the long-run level of unemployment depended on government policy, and that the government could achieve a low unemployment rate by accepting a high but steady rate of inflation. In the late 1960s, Milton Friedman, a monetarist, and Columbia’s Edmund Phelps, a Keynesian, rejected the idea of such a long-run trade-off on theoretical grounds. They argued that the only way the government could keep unemployment below what they called the “natural rate” was with macroeconomic policies that would continuously drive inflation higher and higher. In the long run, they argued, the unemployment rate could not be below the natural rate. Shortly thereafter, Keynesians like Northwestern’s Robert Gordon presented empirical evidence for Friedman’s and Phelps’s view. Since about 1972 Keynesians have integrated the “natural rate” of unemployment into their thinking. So the natural rate hypothesis played essentially no role in the intellectual ferment of the 1975–1985 period.

Third, I have ignored the choice between monetary and fiscal policy as the preferred instrument of stabilization policy. Economists differ about this and occasionally change sides. By my definition, however, it is perfectly possible to be a Keynesian and still believe either that responsibility for stabilization policy should, in principle, be ceded to the monetary authority or that it is, in practice, so ceded. In fact, most Keynesians today share one or both of those beliefs.

Keynesian theory was much denigrated in academic circles from the mid-1970s until the mid-1980s. It has staged a strong comeback since then, however. The main reason appears to be that Keynesian economics was better able to explain the economic events of the 1970s and 1980s than its principal intellectual competitor, new classical economics.

True to its classical roots, new classical theory emphasizes the ability of a market economy to cure recessions by downward adjustments in wages and prices. The new classical economists of the mid-1970s attributed economic downturns to people’s misperceptions about what was happening to relative prices (such as real wages). Misperceptions would arise, they argued, if people did not know the current price level or inflation rate. But such misperceptions should be fleeting and surely cannot be large in societies in which price indexes are published monthly and the typical monthly inflation rate is less than 1 percent. Therefore, economic downturns, by the early new classical view, should be mild and brief. Yet, during the 1980s most of the world’s industrial economies endured deep and long recessions. Keynesian economics may be theoretically untidy, but it certainly predicts periods of persistent, involuntary unemployment.

According to the early new classical theorists of the 1970s and 1980s, a correctly perceived decrease in the growth of the money supply should have only small effects, if any, on real output. Yet, when the Federal Reserve and the Bank of England announced that monetary policy would be tightened to fight inflation, and then made good on their promises, severe recessions followed in each country. New classicals might claim that the tightening was unanticipated (because people did not believe what the monetary authorities said). Perhaps it was, in part. But surely the broad contours of the restrictive policies were anticipated, or at least correctly perceived as they unfolded. Old-fashioned Keynesian theory, which says that any monetary restriction is contractionary because firms and individuals are locked into fixed-price contracts, not inflation-adjusted ones, seems more consistent with actual events.

An offshoot of new classical theory formulated by Harvard’s Robert Barro is the idea of debt neutrality (see government debt and deficits). Barro argues that inflation, unemployment, real GNP, and real national saving should not be affected by whether the government finances its spending with high taxes and low deficits or with low taxes and high deficits. Because people are rational, he argues, they will correctly perceive that low taxes and high deficits today must mean higher future taxes for them and their heirs. They will, Barro argues, cut consumption and increase their saving by one dollar for each dollar increase in future tax liabilities. Thus, a rise in private saving should offset any increase in the government’s deficit. Naïve Keynesian analysis, by contrast, sees an increased deficit, with government spending held constant, as an increase in aggregate demand. If, as happened in the United States in the early 1980s, the stimulus to demand is nullified by contractionary monetary policy, real interest rates should rise strongly. There is no reason, in the Keynesian view, to expect the private saving rate to rise.

The massive U.S. tax cuts between 1981 and 1984 provided something approximating a laboratory test of these alternative views. What happened? The private saving rate did not rise. Real interest rates soared. With fiscal stimulus offset by monetary contraction, real GNP growth was approximately unaffected; it grew at about the same rate as it had in the recent past. Again, this all seems more consistent with Keynesian than with new classical theory.

Finally, there was the European depression of the 1980s, the worst since the depression of the 1930s. The Keynesian explanation is straightforward. Governments, led by the British and German central banks, decided to fight inflation with highly restrictive monetary and fiscal policies. The anti-inflation crusade was strengthened by the European monetary system, which, in effect, spread the stern German monetary policy all over Europe. The new classical school has no comparable explanation. New classicals, and conservative economists in general, argue that European governments interfere more heavily in labor markets (with high unemployment benefits, for example, and restrictions on firing workers). But most of these interferences were in place in the early 1970s, when unemployment was extremely low.
Keynesian Economics: The Concise Encyclopedia of Economics | Library of Economics and Liberty

That's not a terrible write-up to describe the Samuelson / Neokeynesian branch, but I don't know if we should rely on an Austrian to explain Keynesian economics.

 

[G.T.]

 

[Valerie]

Here's another more concise description:

Keynesian economics is an economic theory named after John Maynard Keynes (1883 - 1946), a British economist. It was his simple explanation for the cause of the Great Depression for which he is most well-known. Keynes' economic theory was based on an circular flow of money. His ideas spawned a slew of interventionist economic policies during the Great Depression.

In Keynes' theory, one person's spendings goes towards anothers earnings, and when that person spends her earnings she is, in effect, supporting anothers earnings. This circle continues on and helps support a normal functioning economy. When the Great Depression hit, people's natural reaction was to hoard their money. Under Keynes' theory this stopped the circular flow of money, keeping the economy at a standstill.

Keynes' solution to this poor economic state was to prime the pump. By prime the pump, Keynes argued that the government should step in to increase spending, either by increasing the money supply or by actually buying things on the market itself. During the Great Depression, however, this was not a popular solution. It is said, however, that the massive defense spending that United States President Franklin Delano Roosevelt initiated helped revive the US economy.

Since Keynesian economics advocates for the public sector to step in to assist the economy generally, it is a significant departure from popular economic thought which preceded it — laissez-fair capitalism. Laissez-fair capitalism supported the exclusion of the public sector in the market. The belief was that an unfettered market would achieve balance on its own. Proponents of free-market capitalism include the Austrian School of economic thought; one of its earliest founders, Friedrich von Hayek, also lived in England alongside Keynes. The two had a public rivalry for many years because of their opposing thoughts on the role of the state in the economic lives of individuals. http://www.wisegeek.com/what-is-keynesian-economics.htm

My main point in responding to the OP is that the initial inception of the stimulus package preceded Obama's election, first of all, and since not really enough time has gone by yet to determine the long term effects on our economy, I'm glad the Obama administration is not so eager to pass another stimulus package.

President Obama's economic team is looking for ways to accelerate the agonizingly slow economic recovery, but the top White House spokesman on Thursday said a large spending measure is not being considered.

"Some big, new stimulus plan is not in the offing," White House press secretary Robert Gibbs said.



National unemployment numbers for August will be released Friday morning. While administration officials do not yet know what those numbers will reveal, analysts widely expect the national unemployment rate will hover near 10.

The anemic job growth has spurred a number of analysts to call for additional stimulus spending, arguing the $787 billion package passed shortly after Obama took office was too small to have the desired impact.

But Gibbs said flatly that a package resembling the first stimulus is off the table as the president's economic team "is looking at a whole host" of possibilities for "targeted measures" that would speed up the recovery.

White House rules out sequel to stimulus bill - TheHill.com

 

[G.T.]

Here's another more concise description:

Keynesian economics is an economic theory named after John Maynard Keynes (1883 - 1946), a British economist. It was his simple explanation for the cause of the Great Depression for which he is most well-known. Keynes' economic theory was based on an circular flow of money. His ideas spawned a slew of interventionist economic policies during the Great Depression.

In Keynes' theory, one person's spendings goes towards anothers earnings, and when that person spends her earnings she is, in effect, supporting anothers earnings. This circle continues on and helps support a normal functioning economy. When the Great Depression hit, people's natural reaction was to hoard their money. Under Keynes' theory this stopped the circular flow of money, keeping the economy at a standstill.

Keynes' solution to this poor economic state was to prime the pump. By prime the pump, Keynes argued that the government should step in to increase spending, either by increasing the money supply or by actually buying things on the market itself. During the Great Depression, however, this was not a popular solution. It is said, however, that the massive defense spending that United States President Franklin Delano Roosevelt initiated helped revive the US economy.

Since Keynesian economics advocates for the public sector to step in to assist the economy generally, it is a significant departure from popular economic thought which preceded it — laissez-fair capitalism. Laissez-fair capitalism supported the exclusion of the public sector in the market. The belief was that an unfettered market would achieve balance on its own. Proponents of free-market capitalism include the Austrian School of economic thought; one of its earliest founders, Friedrich von Hayek, also lived in England alongside Keynes. The two had a public rivalry for many years because of their opposing thoughts on the role of the state in the economic lives of individuals. What Is Keynesian Economics?

My main point in responding to the OP is that the initial inception of the stimulus package preceded Obama's election, first of all, and since not really enough time has gone by yet to determine the long term effects on our economy, I'm glad the Obama administration is not so eager to pass another stimulus package.

President Obama's economic team is looking for ways to accelerate the agonizingly slow economic recovery, but the top White House spokesman on Thursday said a large spending measure is not being considered.

"Some big, new stimulus plan is not in the offing," White House press secretary Robert Gibbs said.



National unemployment numbers for August will be released Friday morning. While administration officials do not yet know what those numbers will reveal, analysts widely expect the national unemployment rate will hover near 10.

The anemic job growth has spurred a number of analysts to call for additional stimulus spending, arguing the $787 billion package passed shortly after Obama took office was too small to have the desired impact.

But Gibbs said flatly that a package resembling the first stimulus is off the table as the president's economic team "is looking at a whole host" of possibilities for "targeted measures" that would speed up the recovery.

White House rules out sequel to stimulus bill - TheHill.com

That's obvious to non-hacks. She's a hack, there's no getting beyond the density.

 

[G.T.]

A montage of quotes by Samurai .....after a quick search reveals that she's quite obsessive about suuuuuuuumfinn'......(the large parts are my fuckin' faave). Jesus Christ, someone needs to give this bitch a hobby. Do the search yourselves, really Sad shizzle. 9 out of every ten posts she tells you "all about" how the "other side" thinks, acts, feels, farts, burps, coughs, fucks.............project much? This shit is classic:


" LIBERALS THINK AND ACT THE SAME.
CRY YOU BETTER OBEY THEIR DEMANDS!!!!!
Like I said. Liberals protest too much.
(It never fails to amuse me, when liberals claim they "don't care" about a subject, but they go in the thread and attack it anyway."the left is fully aware of their OBVIOUS double standards Another thing liberals do
laughably partisan liberals in the media
the lefty went to personal attacks when he knew he was losing the argument.
mean this is a PERFECT imitation of how liberals see NRA/Tea Party/etc.
Liberals will tell you who they fear, by how much they "ridicule" someoneway liberal writers simply say what THEY THINK
the messiah liberals were hoping
There goes that elitist streak in liberals.
The liberals will need all the booze
the left has the Constitution on their side don't they? Reviling anyone who doesn't agree with them!
Hope you're proud of yourselves lefties. This is what you stand for.
once again liberals come to eat their own words
Liberals are, arrogant, elitist, socialist/fascists.
except the far left, and they don't win elections."