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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:100
    as

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    References listed on IDEAS

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    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; Modern Monetary Theory
    • 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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