Friday, November 21, 2008
IS KEYNES REALLY BACK?
Amity Shlaes nicely outlined (link) the upcoming return of Keynesian economic policy initiated by efforts to boost consumer spending despite the empirical evidence about the lifetime path of consumption pattern. While president Obama has a very smart and knowledgeable team of economic advisers such as Jason Furman, David Cutler and Jeff Liebman, he opposed free-trade agreements with South Korea and Columbia, while he supported the proposal to raise tariffs on Chinese goods in case Chinese government would not allow yuan to appreciate relative to the U.S dollar. There is an overwhelming evidence that an increase in government spending negatively affects output, employment and productivity while proposals to extend health care benefits over the boundaries of tax scheme are a worrying threat to growth and stability of the U.S economy and the overall fiscal stance of the United States.