As a matter of timing, this can’t be right. The Kemp Roth tax cut was enacted in 1981. Real GDP peaked in 1981q3 — the tax cut corresponds to the beginning of the recession not the end.
The part that Boot misses (because it has been unimportant for the past 10 years) is monetary policy. It is possible to cause a severe recession in spite of fiscal stimulus by driving the Federal Funds rate up over 19 %. The combination of loose fiscal and very tight monetary policy caused huge real interest rates and a collapse of investment. It also caused an over-valued dollar, a huge surge in imports and deindustrialization.
One can discuss the effects of fiscal policy without considering the response of monetary authorities only when monetary policy is constrained by the zero lower bound. If GDP is determined by the Fed’s ideas about what level is consistent with low inflation, then fiscal policy which is, in itself, stimulatory just changes the composition and not the level of demand.
Towards the end of 1980 Volcker was backing off his initial tight monetary policy and the economy inched towards a recovery from that initial recession. But when Volcker saw Kemp-Roth, he feared excess aggregate demand and overreacted which led to the 1982. If Max Boot does not understand this – he is just another uninformed idiot. Now if he does get this – he is just another supply side liar.
You did not (as Robert did not) provide a link to the oped from Boot but here it is:
https://www.sltrib.com/opinion/commentary/2019/01/17/max-boot-republicans-have/
It is sort of all over the map. Is he frustrated with a massive tax cut for the rich when the economy is near full employment? Or is he frustrated with the demand for a stupid wall and a dumb shut down. OK – there is a lot to be frustrated about given the White House was captured by a loud mouth fool. But this oped is an odd little rant.
Looking at the implicit price deflator, after the fact inflation, was rising about two percent a year, the second derivative of price. That is likely un-measurable in real time, so inflation adjusted pricing wasn’t working at all. Gold profit taking, from the Nixon shock, likely took a decade to settle. Gold returns was not something the fed could manage, inflation control leverage gone for a while.
Gold? Nixon shock? And we thought Moore was the cuckoo here. But this sentence?
“Looking at the implicit price deflator, after the fact inflation, was rising about two percent a year, the second derivative of price.”
Matt Young pulls out his calculus text and writes gibberish. Inflation is the rate of change of the price level (1st derivative). The 2nd derivative? Uh Matt that would be the change in the inflation rate. Do go back to your middle school class and learn basic mathematics.
PGL:
I wish there was a way we could upvote comments. Nicely said to get the point across.
Ask Mark Thoma about the comments from Matt Young over the years. Incessantly right wing and always incredibly dumb. He’s a well known troll.
My favorite Matt Young claim was that somewhere(I forget exactly) in Northern California a hospital had been built solely to provide knee and hip replacements for local and state government employees.
@pgl January 30, 2019, 5:05 pm
> …when Volcker saw Kemp-Roth, he feared excess aggregate demand and overreacted which led to the 1982. If Max Boot does not understand this – he is just another uninformed idiot. Now if he does get this – he is just another supply-side liar. ”
That’s probably the most concise explanation which is enough for the given case. Thank you!
Max Boots a “wardog” –a rabid lobbyist of MIC, and, as such, is as far from economics (even voodoo supply side economics) as one can get.
Also like all neocons, he is statist par excellence. If not MIC money, he would probably be forced to paint houses for a living, instead of writing his warmongering nonsense in Bezos blog.