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The Case Against the Case Against Discretionary Fiscal Policy

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  • Alan S. Blinder

    (Princeton University)

Abstract

Times change. When I was introduced to macroeconomics as a Princeton University freshman in 1963, fiscal policy and by that I mean discretionary fiscal stabilization policy was all the rage. The policy idea that would eventually become the Kennedy- Johnson tax cuts was the new, new thing. In those days, discussions of monetary policy often fell into the oh, by the way category, with a number of serious economists and others apparently believing that monetary policy was not a particularly useful tool for stabilization policy. The appropriate role for central bank policy was often said to be "accommodating" fiscal policy, which was cast in the lead role. Thus many people, probably including President Kennedy, thought that Walter Heller, who was then chairman of the Council of Economic Advisers, was more instrumental to stabilization policy than William McChesney Martin, who was then chairman of the Federal Reserve Board. Indeed, it was said that Kennedy only remembered that Martin was in charge of monetary policy by the fact that both words began with the letter M.

Suggested Citation

  • Alan S. Blinder, 2004. "The Case Against the Case Against Discretionary Fiscal Policy," Working Papers 102, Princeton University, Department of Economics, Center for Economic Policy Studies..
  • Handle: RePEc:pri:cepsud:100blinder.pdf
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    References listed on IDEAS

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    Cited by:

    1. Wendy Carlin, 2013. "Real Exchange Rate Adjustment, Wage-Setting Institutions, and Fiscal Stabilization Policy: Lessons of the Eurozone's First Decade," CESifo Economic Studies, CESifo, vol. 59(3), pages 489-519, September.
    2. Jan Veld & Martin Larch & Marieke Vandeweyer, 2013. "Automatic Fiscal Stabilisers: What They Are and What They Do," Open Economies Review, Springer, vol. 24(1), pages 147-163, February.
    3. van Riet, Ad, 2010. "Euro area fiscal policies and the crisis," Occasional Paper Series 109, European Central Bank.
    4. Ethan Ilzetzki & Carlos A. Vegh, 2008. "Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?," NBER Working Papers 14191, National Bureau of Economic Research, Inc.
    5. Lukas Vogel & Werner Roeger & Bernhard Herz, 2006. "Optimal Simple Rules for Fiscal Policy in a Monetary Union," Working Papers 021, Bavarian Graduate Program in Economics (BGPE).
    6. Marco Di Maggio & Amir Kermani, 2016. "The Importance of Unemployment Insurance as an Automatic Stabilizer," NBER Working Papers 22625, National Bureau of Economic Research, Inc.
    7. International Monetary Fund, 2008. "Singapore; Selected Issues," IMF Staff Country Reports 08/281, International Monetary Fund.
    8. Farrell, Henry & Quiggin, John, 2011. "Concensus, Dissensus and Economic Ideas: The Rise and Fall of Keynesianism During the Economic Crisis," Risk and Sustainable Management Group Working Papers 151527, University of Queensland, School of Economics.
    9. Thomas R. Michl, 2013. "Public debt, growth, and distribution," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(1), pages 120-144, January.
    10. Leif Lybecker Eskesen, 2009. "The Role for Counter-Cyclical Fiscal Policy in Singapore," IMF Working Papers 09/8, International Monetary Fund.
    11. Ferdinandusse, Marien & Checherita-Westphal, Cristina & Attinasi, Maria Grazia & Bańkowski, Krzysztof & Palaiodimos, Georgios & Trindade Campos, Maria Manuel, 2017. "Euro area fiscal stance," Occasional Paper Series 182, European Central Bank.
    12. Hristov, Atanas, 2012. "The Effects of Discretionary Fiscal Stimulus: A Survey," MPRA Paper 44714, University Library of Munich, Germany.
    13. repec:ebl:ecbull:eb-17-00229 is not listed on IDEAS

    More about this item

    Keywords

    fiscal policy;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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