One of the main objectives of this blog is to increase awareness of the differences between the three main schools of economic thought today. With respect to the current debt ceiling crisis, the Keynesian viewpoint would be the economy is stalling and needs a stimulus of deficit spending. That only works when the nation has reserves or can borrow more money, which is certainly not the case now. Keynesians, your opinion doesn’t matter in this political environment. Now, go away!
The Supply-Sider viewpoint would be we don’t need to increase taxes on the wealthy or anybody else right now. The one true way of increasing growth is a tax DECREASE, regardless of where we are in the economic cycle. You see this in the Tea Party comments. (Don’t forget I’ve met and even had lunch with Arthur Laffer, the father of Supply-Side economics and also taught one of the first courses in this country on the subject. So, don’t tell me I don’t understand.)
The Austrian viewpoint (truth in typing: I belong in this school at this point in the economic cycle) is that a $3 trillion reduction in the deficit without a tax increase is NOT as good as $4 trillion in the deficit with a tax increase. We’re more focused on the size of the deficit cut. The bond vigilantes only care about the amount of the deficit, not how we reduced it.
Class dismissed . . .