Catch me if you can!

Brad Delong again criticizes the credentials of another economist, namely Allan Meltzer, all over the issue of Governmental Spending–Some call it Stimulus. I actually have difficulties with both Sides of the argument, and will actually report that technically I am not an Economist; One cannot enjoy the title unless One has endured the proper number of boring graduate courses. I will not enter into a real discussion of this limiting factor, simply alluding to the loss of intellectual material, while turning to the issue of Government Spending.

Economists expend a great deal of time talking about Bubbles, but may miss some serious considerations in their discussion of them. Almost all economists would agree that Bubbles are bad, inciting sharp Inflation, raising Consumption debt, and placing Wages and Salaries permanently behind Business Profits; to the Student, Business can always sell the Product for better price than the Schedule under which the Product was produced. The trouble comes in that Consumption becomes striated under these conditions, with bursts of Consumption later redeemed with much higher debt service Costs. Now We return to Earth, and state that macroeconomics seeks to permanently enclose the Bubbles within the economy, with the insistence that total GDP return to levels once reached with the Bubbles in operation; even though recessions are the instrument which bursts such Bubbles (actual GDP levels insist on a Growth ratio not previously found).

One can study this effect, and simply ignore it; something which Delong-style Keynesians chose to do. Conservative economists, like Meltzer, believe that Government Spending be held low, and let the Markets develop new Bubbles. I would agree with these economists, except for their insistence that Businesses be given Tax advantages to incite these new Bubbles, a factor which I find way over the Top. I have long been convinced that both Groups are wrong, but have never found a way to explain my Thoughts adequately to face the outrage it is expected to achieve when advanced. Still, I will try; and endure the reaction.

My thesis simply states that every Recession releases about 6-8% of excess Money flows due to the burst Bubbles, which makes Consumer pricing perfectly Sticky; while at the same time, the burst Bubble eliminates Private Sector business initiatives on which Profits can be made. The purchase of Government debt is the obvious solution, but does nothing about the excess funds within the economy; a circumstance producing both Wage Pressure and Product Price maintenance. The trouble comes from the Bubble funds, with no one doing anything to free the economy from the debt service Costs of maintaining these funds. My Proposal is to actually raise Taxes, in order to eliminate these funds and their debt service from the economy; Conditions where larger Government Spending patterns are more acceptable because they are funded to greater degree. This Proposal has the distinct advantages of a direct refutation of Keynesian Thought, while at the same time informing business Conservatives that I want to raise their Taxes. I am only lucky that they would have to come to the Midwest to shoot me! lgl