Fight of the Century: Keynes vs. Hayek Round Two

A follow up to the first Keynes vs. Hayek video.

Illinois State’s Lawmakers Pass Tax Increase

Subject to the signature of the Governor, Illinois lawmakers have increased personal income tax from 3% to 5% with the expectation of raising revenue. Whether this is effective is determined by the elasticity of the model. I am keeping an eye on this.

State’s lawmakers pass 66 percent tax increase – Politics – More politics – msnbc.com.

Let’s Not Make a Deal – Paul Krugman

Back in 2001, former President George W. Bush pulled a fast one. He wanted to enact an irresponsible tax cut, largely for the benefit of the wealthiest Americans. But there were Senate rules in place designed to prevent that kind of irresponsibility. So Mr. Bush evaded the rules by making the tax cut temporary, with the whole thing scheduled to expire on the last day of 2010.

via Let’s Not Make a Deal – NYTimes.com.

Why We’re Falling Into a Double-Dip Recession

Robert Reich (Why We’re Falling Into a Double-Dip Recession) provides a cogent analysis of the current employment situation. He is not calling a Double Dip recession quite yet, but I will be very surprised if we don’t experience one in the United States—and for all of the reasons he states. Moreover, according to This Time It’s Different (PDF), a typical recession results in an unemployment rate 7-ish points above per-recession averages. That should mean a rate of over 12 percent for a duration of 3 years. Of course, the trigger to this recession suggests that this is bigger than an average recession, so I’d expect the it to last longer (or double-dip) and the unemployment rate to increase.

As Reich points out, the primary reason it isn’t as bad as it could be is due to good old-fashion fiscal policy. He does a good job of pointing out the distinction between a Keynesian variety short-term stimulus from the long-term debt accrued by the supply-siders of the past 30-odd years. If we don’t get a handle on this, we may end up experiencing a lost decade much like Japan in the 1990s.

“Fear the Boom and Bust” a Hayek vs. Keynes Rap Anthem

This has been around for a bit, but it is topical to this week’s material.

New Books

I posted a couple of new book links on the Recommended Reading page. Keynes: Return of the Master is on the policies of John Maynard Keynes as put forth by his biographer, Robert Skidelsky. The other is an offering by a Australian economist, Steve Keen, Debunking Economics in the neo-Classical vein.