US moving from Keynsian to Supply Side economics

[Shaun @ Tru6]

Topic on Bloomberg this morning. Who benefits, who loses? How are you planning to benefit? Discuss.

[Cajundaddy]

Finally, but are we too late?!?
John Maynard Keynes was a British economist and his Marxist ideas on government "managing" the economy through borrowing during hard times were a principal driver in the fall of the British empire. The fundamental flaw in his reasoning is that he never considered basic human nature. People have been highly motivated to pursue their own best interest since the beginning of time. This applies to politicians as well. While going through a downturn in the economy it seems simple enough to borrow (print money) to stimulate the economy and then pay it back during the happy times. The fundamental problem is that politicians want to achieve re-election to hang onto their power and are never willing to pay it back. Ever.

Welcome to the debt crisis we are currently in.

There are no perfect economic models but Keynesian economics is fundamentally flawed for the reasons stated above. I favor the views of the Chicago School of Economics and Milton Friedman. There are some holes in these models as well but they are far more consistent with basic human nature, and civilizations who follow them tend to thrive.

[pwd72s]

Originally Posted by Cajundaddy

Finally, but are we too late?!?
John Maynard Keynes was a British economist and his Marxist ideas on government "managing" the economy through borrowing during hard times were a principal driver in the fall of the British empire. The fundamental flaw in his reasoning is that he never considered basic human nature. People have been highly motivated to pursue their own best interest since the beginning of time. This applies to politicians as well. While going through a downturn in the economy it seems simple enough to borrow (print money) to stimulate the economy and then pay it back during the happy times. The fundamental problem is that politicians want to achieve re-election to hang onto their power and are never willing to pay it back. Ever.

Welcome to the debt crisis we are currently in.

There are no perfect economic models but Keynesian economics is fundamentally flawed for the reasons stated above. I favor the views of the Chicago School of Economics and Milton Friedman. There are some holes in these models as well but they are far more consistent with basic human nature, and civilizations who follow them tend to thrive.

Pretty much sums it up...so, not wanting to send this to parf, yes, I consider the move good news. Here's where I'd inset an old Milton Friedman video, except it would go straight to Parf. Suggest Shaun go to youtube, watch a few, then try to prove old Milton wrong...

[jyl]

It is hard to discuss economics intelligently, because none of us are educated in economics. Staying in a Holiday Inn doesn’t cut it.

It is also hard because economic policy is all tied up with politics, business, profits, social issues, etc. Put another way, there are huge reasons for many interest groups to want to confuse and mislead us.

I have possibly had more exposure in economics than the average bozo. I took your basic micro and macro in grad school, a lot of finance classes, and have spent 27-some years in the stock market world which is closely related to economics, practical economics anyway. We sure pay a heck of close attention to economic data and policies, and have to bet on economic outcomes.

Even with that, I can come up with no reason to think that Keynesian economics are better or worse than supply side economics. I actually think the debate is, as a practical matter, pretty meaningless because no country actually does one but not the other in any manner pure enough to be a good test.

Every country does some Keynesian things: government steps in to stabilize the economy when it falls, to support demand in crisis, etc. Every country also does some supply side things: encourages more output of desired things with regulatory or tax relief. For that matter, every country also does lots of other things: industrial policy, social safety net, etc.

Depending on the situation, interest groups will sometimes call for one or the other. For example, when the economy is “good”, businesses are all for supply side policies. Lower taxes, less regulation, government get out of the way and let us make more money! When the economy is “bad”, those same business interests will howl for Keynesian actions. Fiscal stimulus, monetary stimulus, boost demand for our products, government don’t just sit there do something!

Investors will clamor for exactly the same things, of course, since we generally make money when corporate profits are high, but when we lose money the government needs to step in to stabilize markets and “protect the little guy” by which we mean protect the wealthy investor class since the little guy’s percent ownership of stocks and bonds is laughably small.

My feeling is, most countries including the US would do well to stick to a moderate, balanced, not extreme path. Keep taxes and regulations moderate, keep public debt moderate, keep income and wealth inequality moderate, keep social benefits moderate, keep corporate profits moderate, keep asset valuations moderate, etc.

Maybe I should invent a new school of economic thought. The “Moderation” school.

[wdfifteen]

Originally Posted by Shaun @ Tru6

Topic on Bloomberg this morning. Who benefits, who loses? How are you planning to benefit? Discuss.

Before this goes to PARF

We've had 40 years of supply-side economics. It's clear who benefits, and it ain't the worker bees.
It has caused record deficits.
The flight of manufacturing out of the US
Private equity decimating business
All of which have resulted in despair among the working-class, which has lead to drug and economic dependency, poor health, poor eduction results, etc

The consumer is the engine of this economy. Smart financial policy would support the consumer, not the denizens of C-suites enriching themselves, playing monopoly with real money. Workers and consumers need to have some skin in the game, or they won't play - it's easier to stick a needle in your arm than work a low-wage crap job that may disappear at any minute. You can preach about it all you want, but people are people, and if they don't see a way up, they'll take a way out.