[Martin Taylor 970220 14:10]
Bill Powers (970220.0845 MST)]
Many of the things that economists devoutly believe SHOULD happen DON'T
happen.
Yes, but _some_ economists do look at the facts. If you can get hold of it,
check out Robert Eisner's "The Federal Deficit: How does it matter," (Science,
237, 1577-1582, 25 Sept 1987). Eisner was at the time President-elect of
the American Economic Association. To quote a part of his abstract:" ...
real deficits have contributed to GNP, consumption, and imports, and to
investment as well. Optimal policy consistent with balanced growth calls
not for elimination of the nominal deficit..." and in the text: "As shown in
Fig 1, the greater the deficit from 1956 to 1984 [MMT: the last year for
which he had figures], the greater was the next year's increase in GNP",
and "Each percentage point of deficit was associated with even larger
increases in private investment, 1.383 percentage points. Far from
being crowded out, investment was crowded in." Finally: "The equilibrium
deficit may be taken as 3.2% of income. Currently [1987] that would total
a deficit of some $144 billion [at the time $157 billion]."
This isn't an economics discussion list, so I keep this note short. But I
may note that the 20% figure quoted from TCP is also mentioned by Eisner,
who finishes his article with this sentence:
"Deficit reduction that reduces such federal or federally supported investment
["scientific research and the vital human capital of education and health]
may prove the real culprit in placing a burden on future generations."
Let's hope, for the sake of the USA as well as of the rest of the world,
that you never get a balanced-budget amendment to your Constitution.
I wrote to the Clinton administration, a couple of years ago, telling them
to LOOK AT THE GODDAMNED DATA (although not in those exact words), and
inform Greenspan that his "anti-inflation" measures don't work.
Eisner looked at the data and thought about what it means. Despite that,
the AEA were willing to make him their President. Not entirely bad?
Martin