|
|
|
| Current Issue |
|
|
| Resources |
|
|
|
Lessons of the Recession
| Article
# : |
18668 |
|
|
Section : |
CURRENT ISSUES
|
| Issue
Date : |
8 / 1991 |
2,582 Words |
| Author
: |
Daniel J. Mitchell
Daniel J. Mitchell is John M. Olin Senior Fellow in Political
Economy at the Heritage Foundation. |
While no two economic downturns are exactly alike, the current recession differs most starkly from other slumps in that few policymakers have proposed antirecession packages designed to restore economic growth. Republicans have been slow to endorse the Economic Growth and Jobs Creation Act of 1991, the tax-cutting legislation sponsored by Sen. Malcolm Wallop of Wyoming and Rep. Tom DeLay of Texas. Democrats also have failed to rally around their traditional bread and butter approach to stimulating the economy--jobs programs and more government spending.
Politicians, of course, are susceptible to focusing on issues foremost in voters' minds, and since polls so far indicate that a majority of Americans do not consider the economy a critical issue, the relative lack of antirecession legislation is not surprising. The Persian Gulf War doubtlessly played a role as well, exiling to the back pages recession news that otherwise might have created a different political climate. And many policymakers are keeping their fingers crossed that the recession will end soon, obviating the need for political battles over how best to stimulate economic growth.
Finally, the paucity of political grandstanding may also be due to the fact that politicians do not know what should be done, which itself may be a reflection of the confusion and discord in the economics profession. This was not always the case. In the post-World War II era, there was widespread belief that economists could use "Keynesian" fiscal policy--stimulating or slowing the economy by changes in tax and spending levels--to keep economic growth stable. The credibility of the Keynesian model, however, collapsed amid the stagflation of the 1970s, a combination of rising inflation and rising unemployment that was supposed to be impossible in a Keynesian world.
The disintegration of the Keynesian orthodoxy opened opportunities for other economic theories, but none has achieved similar acceptance. The supply-side approach of lower taxes provided the intellectual foundations of Reaganomics, but the supply-siders never accumulated the support needed to fully replace Keynesianism as a dominant theory. Other theories have been put forward, many attracting significant support in both academia and the public policy arena. The plethora of competing theories, however, hardly increases confidence among policymakers or creates an impression that economists know all the answers. With economist spending time quarreling with each other, it is not surprising that their influence on public policy--doubtlessly limited to begin with--has probably declined to new
...
Read Full Article
Look for this article in Ask.com
|
|
