tax cut

christian11 at mindspring.com christian11 at mindspring.com
Fri Mar 16 16:34:59 PST 2001



>Brad DeLong wrote:>


>Remember that I (and a lot of other fiscally-orthodox Dems) are
>capital fetishists: believers in large positive externalities from
>investment through learning-by-doing, learning-by-using, and
>worker-employer quasi-rent sharing. Thus a low national savings rate
>terrifies us.
>

But the US has had a fairly low savings rate (I mean counting gov and private balances) for most of the late 80's and early 90's, when there was also a fairly sustained investment boom, no? What prevents us from borrowing Asia's savings for investment?


>Thus we favor the policy mix proposed by Robert Solow back in the
>early 1960s: tight fiscal policy (to boost national savings);

Doesn't a government surplus actually take money out of the private banking system? I mean, cet par, (w/o buying back debt) wouldn't this restrain investment?


>Of course, this requires that (a) the Federal Reserve be competent,
>(b) the Federal Reserve have a sound and accurate view of what
>"maximum employment and purchasing power without accelerating
>inflation" means, and (c) the economy not have gotten itself so
>wedged that monetary policy is ineffective.

I'm curious as to why you think (b) holds. Greenspan has been groping in the dark on this score, so far as I can tell. Or, his efforts in this regard have run across his other two primary interests: bursting the tech bubble, and then propping it up. No?

Christian



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