Sunday, November 15, 2015

Why Is Macro So Hard? The Things We Won’t Talk About

Here’s a quote:

You can say anything you like about sex nowadays, but the moment the topic turns to fiscal policy, there are endless things that everyone knows, that are even written up in textbooks and scholarly articles, but no one is supposed to talk about in public.

So I make no claims to thinking in tune with the author generally, or approving of the source article.

I would say that the problem is broader than fiscal policy though.

So what are some random things with fiscal policy that we’re not allowed to talk about? How about:

  • Government deficits move with the business cycle: lots of politicians claim responsibility for movements toward budget surplus that are nothing more than side effects of business cycle expansions.
  • Governments run deficits in some months and surpluses in others. You’d think this would lead to volatile economic outcomes if deficits were actually important. It doesn’t because they’re not.
  • If you thought it was good that Clinton ran surpluses, don’t forget that Bush II did too.
  • If you though those surpluses were good, don’t forget that they were the aftereffect of large national tax increases in 1990 and 1993.
  • Obama is known for his stimulus package. Bush II should be too.
  • Republicans: you can be in favor of reducing taxes without tossing out the trope that the Laffer curve operates everywhere all the time. It doesn’t. It’s not even close.
  • Reagan didn’t cut government spending. In some areas he cut the growth rate of government spending.

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