We are all Keynesians now

Fellows, Jeffrey jmf9 at cdc.gov
Fri Jun 5 13:01:00 PDT 1998


Doug wrote: [paraphrasing] "Reagan was the biggest Keynesian of them all."

I am not satisfied with the Keynesian characterization of Reagan's deficit spending. It seems to me that the purpose of Keynesian pump priming is to increase effective demand (of consumers, broadly defined). The combined tax cuts and growth in military spending, along with other attacks on labor, acted to redistribute income up the ladder, possibly even more than it spurred production(?), by lessening the present and future tax burden on the rich and redirecting economic activity toward monopoly producers). It seems that for most people, personal debt and second jobs were the principal means of increasing effective demand. I don't think Keynes had increasing the demand of rich folks in mind, especially since he was well aware that increased wealth led to declining rates of consumption. So what would have been the impact on GDP if the tax cuts had maintained the existing degree of progressiveness, and the spending had been on affordable housing, universal health care, education?

Another question must be asked, just because a broad outcome appears Keynesian, does that mean the parties responsible were Keynesian or invoked Keynesian policies?

Jeff



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