Did World War II spending boost economic growth? Although some statistics appear to affirm this, wiser historical analysis demonstrates that artificial increases in output during the war masked a debilitated private economy. Meaningful growth increased after the war, when free-market mechanisms returned and marginal tax rates were reduced. Gross national product (GNP), the total value of everything produced by United States domestically or abroad, did increase during the war and trended downward as the war ended in 1945, falling considerably in 1946 and 1947. It would be shallow analysis, however, …
As we’ve argued countless times, government attempts to stimulate the economy create uncertainty that often paralyzes business decisions. Don’t take our word, though. In a letter to President Roosevelt during the Great Depression, the father of Keynesianism himself, John Maynard Keynes, wrote the following: You are engaged on a double task, Recovery and Reform…. Even wise and necessary Reform may, in some respects, impede and complicate Recovery. For it will upset the confidence of the business world and weaken their existing motives to action, before you have had time to …
If U.S. history is a painting on a giant canvas, President Barack Obama’s speech this week in Osawatomie, Kansas, is a thick coat of whitewash layered all over it, and the failure of the last three years lies underneath. The President’s pretense is that, no, it’s not Obamanomics that has caused persistent unemployment, stunted growth and record deficits–it’s supply side economics! Talk about audacity. The President’s speech was a naked portrayal of his vision of America–one where inequality runs rampant, where the American dream is nearly dead, where the rich …
It sounds like a former Obama Administration official is changing his tune on two of the President’s early stimulus efforts. Austan Goolsbee, former chairman of President Obama’s Council of Economic Advisers, says that in retrospect he would not have supported the Cash for Clunkers program or the home buyer tax credit. Politico reports: “Because we didn’t know if [economic recovery was] going to be short or long,” the Obama administration tried measures to address both scenarios, Goolsbee explained on MSNBC’s “Morning Joe.” “If you look at Cash for Clunkers or the first home …
The Keynesian policy of trying to increase total i.e. “aggregate” demand – either by having government spend, or by cutting taxes just to leave more money in people’s pockets in hopes that they’ll spend – to revive the economy, never works. The latest installment of Keynesian failure is the payroll tax cut. Predictably, like its predecessors, this “stimulus,” which aimed at putting money in people’s pockets, failed. The economy was unmoved, and indeed appears now to be slowing again, as today’s bleak jobs report underscores. This wasn’t the first time Keynesian …
It’s not Eminem or Dre, not East Coast or West. It’s economists Hayek and Keynes, and Congress can’t decide who gets it best. They’re battling it out on the mean streets of DC, to see who can fix the economy…. Sometimes, the best way to get a point across is to bust a rhyme, and the floors of Congress are no exception. This week, EconStories.tv released its new video, “Fight of the Century,” featuring economists John Maynard Keynes and Friedrich August Hayek bringing the heat during a congressional hearing.
The obvious reason to prevent a tax hike by extending current tax rates is that doing so will prevent further economic harm to an already flat economy. How do we know that tax increases will cause economic harm? Three examples: 1932, 1937 and 1993. After the 1929 stock market crash, the Smoot-Hawley tariff of 1930 raised import prices and more importantly threw a bucket of cold water on global trade flows, helping send the economy into deep depression. The economy had very little chance to recover. Along with gross and …
Congressional Budget Office (CBO) Director Douglas Elmendorf recently testified before the Senate Budget Committee on policies that might give the economy a helpful lift in the near term. Congress is right to be concerned. But for an inventory surge last winter, the economy remains stuck in low gear at about 1 percent growth. This is too slow even to prevent unemployment from rising over time, let alone helping the ranks of the unemployed find new jobs. As the muddling economy shows painfully clearly, what Congress has wrought so far—massive stimulus …
Tax-hike advocates have erected yet another straw man to protect their high-tax policy, now arguing that little economic harm would be done if Congress and the president were to raise taxes on higher earners because these high-tax sufferers would have saved the money anyway. Yet the issue is not saving vs. consumption; the issue is incentives, as Robert Barro points out in today’s Wall Street Journal. Of course, the tax hikers prefer to talk in terms of whether tax cuts for the wealthy would help the economy. But we’re not …
The New York Times got it half-right. Friday’s jobs report was highly discouraging, causing the Times to reflect that “there’s just no positive spin for this.” And you’d better believe they tried. In July, there were 131,000 jobs lost, and the unemployment rate held steady at a worrisome 9.5 percent only because so many potential workers are giving up and leaving the workforce entirely — all adding to the perception of a “dissolving recovery.” The Times complains the Washington policy response has been “inadequate, at best,” and tsk-tsks that a …
