Tuesday, December 9, 2008

Throwing Keynes Under the Bus, Part 2

It has to be done, but who ever thought that Greg Mankiw would cautiously, very cautiously join the movement?:

Larry Kudlow - Which would give a bigger jolt to the economy: lower taxes or bigger government spending?

Greg Mankiw - Well the standard textbook Keynesian theory suggests that if you're interested in increasing aggregate demand, a dollar of government spending is going to generate more demand than a dollar of tax cuts but there's actually some evidence that suggests that's not exactly true....that tax cuts may do more in terms of stimulating private investment than will government spending. And so I think the really[sic] question is what's the government spending the money on and is it things we really need. If it's things we need and are useful that's fine. But if there not things we need it's probably better to use the money for tax cuts.

See it wth your own eyes. Video here.

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