From: MEDELMA@cms.cc.wayne.edu (Michael Edelman)
Subject: Re: Clintonomics
Organization: Wayne State University, C&IT
Date: Fri, 31 Jul 1992 12:41:20 GMT

In article <1992Jul30.202409.22631@news.columbia.edu>
egl1@cunixf.cc.columbia.edu (Elizabeth G. Levy) writes:
 
>
>Reprinted w/o permission from that commie/leftist rag, Businessweek,
>     [...much pointless stuff deleted...]
 
First of all, be advised that Robert Kuttner, author of the article,
is considered to be a joke by economists. He's a columnist, not an academic
or a businessman. His writing on economics is often laughably ignorant.
 
>Clinton tells a third story.  He shares with the neo-Keynsians a
>refusal to be intimidated by the deficit.  But unlike that of the
>neo-Keynsians, his view is not primarily a macroeconomic story at all.
>Rather, it is concerned with structural factors--how effectively each
>part of the economy works, and how efficiently the pieces fit
>together.  The Clinton blueprint emphasizes the quality of America's
>labor and capital, the potency of its technology, the state of its
>infrastructure, and sectoral inefficiencies such as health care.
>
I read this as saying that Clinton has a view which is based on neither
Keynes' General Model nor the classic model, which means that either
Kuttner is unbelieveably ignorant- or he's a Nobel candidate as he's
discovered a new model with better explainatory power. Let's see:
 
>In effect, Clinton's econoic framework represents a turning away from
>macroeconomics.  Thus, he proposes a program of lifetime learning and
>training to improve the quality of the work force: a $50
>billion-a-year program of renewed public investment aimed at repairing
>decayed infrastructure and at stimulating advanced technologies;
>conversion of defense technology to commerical purposes; targeted tax
>incentives to promote private investment; and comprehensive health
>care reform.
 
No, Kuttner was just BS-ing us. Clinton's program is a typical old
Keynsian style spend-our-way-to-prosperity model. AS I noted previously,
he endorses Reich's approach, destroying capital markets and then
attempting to rebuild them.
>
>Not surprisingly, this approach contrasts radically with the
>supply-side strategy of the past decade, which claimed that tax breaks
 
Kuttner also confuses analysis with policy.
 
>for the ealthy would increase savings, investment and growth.  What is
>more surprising is that the Clinton program also breaks with many
>assumptions of the neo-Keynsian brain trust, which has advised
>Democratic candidates since John Kennedy.  All of Clinton's senior
>economic advisors--human-capital expert and business consultant Ira
>Magaziner, Harvard political economist Robert B. Reich, Occidental
>College planner and author Derek Shearer, and Robert J. Shapiro of the
>Progressive Policy Institute--are people who look at the economy
>structurally rather than in terms of macroeconomic factors, such as
 
This is a nonsensical statement.
 
>deficits.  In the structural view, the real story is the quality of
>the nation's physical and human capital, the organization of its
 
This is another illustration of Kuttner's ignorance of modern economics.
One of the great advances in modern economics has been the development
of tools for analyzing dynamic behavior. Merely looking at resources
would lead one to believe that the USSR was among the most economically
strong nations on the face of the earth a few years back. (In fact, Kuttner
and others had made this argument)
 
>corporations, and the way capital markets serve business enterprises.
>An economy with more efficient inputs will grow faster and cut the
>deficit.
>
>What Clinton has done is to take back the growth issue--and in a novel
>way that rejects both the supply-side view as well as the austerity
>view that sees future growth as requiring belt-tightening now.  Thus,
>though Clinton is a centrist on social issues, his econoic program is
>more in the tradition of the Roosevelt-Truman-Kennedy than those of
>his party's last three nominees.
 
That also sounds like a bit of nonsense. There's been little difference.
The only difference has been that Jimmy Carter actually went against his
advisors briefly and appointed a Fed chairman they all despised. William
Greider documents this, BTW. Otherwise they all believed in high taxes and
high rates of government spending.
>
>Nonetheless, a Clinton admininstration would be at risk in three
>distinct respects.  If Clinton is elected, the usual suspects will
>clamor for influence.  He will be warned that structuralists like
>Magaziner and Reich are not "real" economists and that Democrats must
 
Well, they're not taken seriously by people like Samuelson or Freidman,
who, though they  major opposing views in modern economics, respect and
lsiten to each other.
 
>reassure money markets by appointing apostles of austerity.
>Furthermore, if inflation starts to rise and the stock market falters
>before January, many financial commentators will see anticipation of a
>Democratic Administration as the cause.  That will only intensify the
Given the rational behavior of investors and the efficiency of the market,
that would be a very reasonable assumption.
 
>pressure on Clinton to embrace fiscal orthodoxy.
>
>Clinton's program is primarily a long-term cure for long-term economic
>problems, not a quick fix.  If we get a "triple-dip" recession,
 
No. Clinton's plan is simple: Tax physical capital heavily and try to drive
the economy with government spending. Talk about "infrastructure" is pure
nonesense; the government cannot apportion productive resources as efficently
as a market. Clinton's plan is no different from the traditional Democratic
plan of high taxes and high spending. The difference is that the government
spending is at an all-time historical high as a %GNP, so new taxes will be
even more devstating.
 
        --mike
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