Word: keynesian
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...from the precepts of Britain's late John Maynard Keynes. An apostle of intervention, Keynes acknowledged a role for money policy but preached that governments should mainly manipulate fiscal policy-that is, taxes and spending-to help determine their economic destinies. Nixon's top economists rejected the Keynesian "new economics" of the Kennedy and Johnson administrations. They labeled themselves "Friedmanesque," and indicted the "new economics'' as the cause of inflation and social unrest...
Most of today's economists, however, have been reared in the Keynesian faith, and they lean toward the Democratic Party. The monetarists, on the other hand, tend to identify with Republicans. The ensuing clash of philosophies thus involves high policy, politics and the fervor of a religious schism. Nixon's half-successful jawboning against steel-price increases suggests that Friedman may have lost his most illustrious convert. After his recently televised "conversation," the President remarked casually to a startled TV commentator: "I am now a Keynesian...
...great debate will probably lead policymakers to use an eclectic blend of Keynesian fiscal principles and Friedman monetary principles. Stanford's George L. Bach, one of the most eminent neutral economists, argues that neither fiscal nor monetary policy alone "is powerful enough to regulate the economy effectively. If the Government is sensible, it will always use both." As a decade of prosperity, inflation and recession has demonstrated, changes in taxes and Government spending are difficult to arrange but quick to act on the economy. By contrast, money policies can be changed overnight, but their effect is long delayed...
...that the economy badly needs a dose of stimulation if unemployment is to be cut substantially by 1972. Politically, Nixon has little choice but to accept deficit spending as an economic pump primer, however offensive the notion of unbalanced budgets is to orthodox Republican economics. "I am now a Keynesian," he confessed shyly after the TV conversation -which led ABC's Howard K. Smith, one of his interlocutors, to observe later: "That is a little like a Christian Crusader saying, 'All things considered, I think Mohammed was right...
...reduction of taxes but as a redistribution of income. If public spending has more value than private consumption, then the Democrats should launch a serious attack on the loopholes in the 1969 Tax Reform Act. They should even place the redistribution of income before their own Keynesian predilections for GNP growth through tax reductions. But only a few souls so far, notably Galbraith, have dared to proclaim the bankruptcy of the New Economics...