NP - Structural w/ Austerity or Demand-Lack w/ Stimulus?

[Paul Mackin]

On 5/11/2012 3:05 PM, Charles Albert wrote:
> http://blogs-images.forbes.com/briandomitrovic/files/2011/08/300px-Laffer_Curve.png
>
> love,
> cfa


John Kenneth Galbraith compared ss economics with feeding the horse oats 
in order to feed the sparrows.

P
>
> On Fri, May 11, 2012 at 2:53 PM, David Morris <fqmorris at gmail.com
> <mailto:fqmorris at gmail.com>> wrote:
>
>     OK. I'll bite. t*?
>
>     On Fri, May 11, 2012 at 12:34 PM, Charles Albert <cfalbert at gmail.com
>     <mailto:cfalbert at gmail.com>> wrote:
>      > (Setting dweeb mode to "STUPIFY")
>      >
>      > Post WW2 t* was clearly too far over to the right. I think one way to
>      > measure the marginal benefit of moving it, either to the left or
>     the right,
>      > is to look at the growth rate of the revenues from the associated
>     tax.
>      > Moving it to the right under Clinton (ceteris paribus) proved far
>     more
>      > effective than moving left under Bush.
>      >
>      > love,
>      > cfa
>      >
>      >
>      >
>      > On Fri, May 11, 2012 at 12:28 PM, Paul Mackin
>     <mackin.paul at verizon.net <mailto:mackin.paul at verizon.net>>
>      > wrote:
>      >>
>      >> I don't think Krugman mentioned in this morning's column the famous
>      >> Killingsworth/Heller "debate" of 1962-63. It was so much like
>     the present
>      >> day contretemps. Unemployment was 4.5 percent, huge for that
>     era, and two
>      >> economists were fighting it out over whether the cause was largely
>      >> insufficient demand or structural. Heller was head of Kennedy's
>     Council of
>      >> Economic Advisers and advocated measures to increase demand.
>     Killingsworth
>      >> was a Michigan State (or it might have been U of Michigan)
>     economist who
>      >> held that demand approaches would be ineffective because of
>     structural
>      >> problems, the big structural problem at the time being
>     automation. Anyway,
>      >> Kennedy was a Keynesian like Heller and in his '63 State of the
>     Union called
>      >> for a big tax cut to increase demand.  After the assassination
>     Johnson got
>      >> about a $10 billion cut passed. And it worked. By '65 the
>     unemployment rate
>      >> was down to 4.5 percent. Not as big an effect as the WWII build
>     up, but
>      >> pretty darn good. Created quite a boom as I recall.
>      >>
>      >> P
>      >>
>      >>
>      >>
>      >> On 5/11/2012 11:07 AM, Madeleine Maudlin wrote:
>      >>>
>      >>> Structure sounds important.
>      >>>
>      >>> On Fri, May 11, 2012 at 9:50 AM, David Morris
>     <fqmorris at gmail.com <mailto:fqmorris at gmail.com>
>      >>> <mailto:fqmorris at gmail.com <mailto:fqmorris at gmail.com>>> wrote:
>      >>>
>      >>>
>      >>>
>     http://www.nytimes.com/2012/05/11/opinion/krugman-easy-useless-economics.html?_r=1&ref=opinion
>     <http://www.nytimes.com/2012/05/11/opinion/krugman-easy-useless-economics.html?_r=1&ref=opinion>
>      >>>
>      >>>
>      >>>
>     <http://www.nytimes.com/2012/05/11/opinion/krugman-easy-useless-economics.html?_r=1&ref=opinion
>     <http://www.nytimes.com/2012/05/11/opinion/krugman-easy-useless-economics.html?_r=1&ref=opinion>>
>      >>>
>      >>>    Krugman:
>      >>>
>      >>>    What does it mean to say that we have a structural unemployment
>      >>>    problem? The usual version involves the claim that American
>     workers
>      >>>    are stuck in the wrong industries or with the wrong skills.
>     A widely
>      >>>    cited recent article by Raghuram Rajan of the University of
>     Chicago
>      >>>    asserts that the problem is the need to move workers out of the
>      >>>    “bloated” housing, finance and government sectors.
>      >>>
>      >>>    Actually, government employment per capita has been more or
>     less flat
>      >>>    for decades, but never mind — the main point is that
>     contrary to what
>      >>>    such stories suggest, job losses since the crisis began
>     haven’t mainly
>      >>>    been in industries that arguably got too big in the bubble
>     years.
>      >>>    Instead, the economy has bled jobs across the board, in just
>     about
>      >>>    every sector and every occupation, just as it did in the
>     1930s. Also,
>      >>>    if the problem was that many workers have the wrong skills
>     or are in
>      >>>    the wrong place, you’d expect workers with the right skills
>     in the
>      >>>    right place to be getting big wage increases; in reality,
>     there are
>      >>>    very few winners in the work force.
>      >>>
>      >>>    All of this strongly suggests that we’re suffering not from the
>      >>>    teething pains of some kind of structural transition that must
>      >>>    gradually run its course but rather from an overall lack of
>     sufficient
>      >>>    demand — the kind of lack that could and should be cured
>     quickly with
>      >>>    government programs designed to boost spending.
>      >>>
>      >>>
>      >>
>      >
>
>