Wednesday, August 17, 2016

John Taylor in dreanland

John Taylor writers a paper": 

Abstract: Recent changes in policy research and in policy-making call for a reassessment of countercyclical fiscal policy. Such a reassessment indicates that countercyclical fiscal policy should focus on automatic stabilizers rather than discretionary actions. Monetary policy has been reacting more systematically to output and inflation; long expansions in the 1980s and 1990s demonstrate policy effectiveness. It is unlikely that discretionary countercyclical fiscal policy could improve things, even with less uncertainty about fiscal impacts. A discretionary countercyclical fiscal policy could make monetary policy making more difficult. Discretionary fiscal policy should focus on long-run issues, such as tax reform and social security reform.

Nice try John, nothing of the sort can happen in a mal-proportioned democracy like ours.  Yap all you want, but when the fiscal stimulus  comes it will be bailouts all the way. 

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