Harvard Economist Robert Barro Interviewed by the Atlantic

The Wall Street Journal ^ | 2/11/2009 | N/A

[Wpin]

Harvard economist Robert Barro being interviewed by the Atlantic:

Atlantic: And I take it from the Wall Street Journal piece you wrote last week . . . well, the piece is just specifically about measuring multipliers, but I take it that you are fairly skeptical in general that fiscal policy will boost aggregate demand.

Barro: Right. There's a big difference between tax rate changes and things that look just like throwing money at people. Tax rate changes have actual incentive effects. And we have some experience with those actually working.

Atlantic: What would you say is the best empirical evidence there?

Barro: Well, you know, it worked to expand GDP for example in '63 and '64 with the Kennedy/Johnson cuts. And then Reagan twice in '81 and '83 and then in '86. And then the Bush 2003 tax-cutting program. Those all worked in the sense of promoting economic growth in a short time frame.

I'm the middle of a study where I am trying to estimate this overall, going back to 1913 -- sort of constructing some measure of the overall effect of the tax rate at the margin, at the moment. I'm just looking at that now, actually . . .

Atlantic: You're talking about the multiplier on a dollar of . . .

[Wpin]

This is a good read...Atlantic guy obviously did not expect the truth about economics. He was looking for liberal BS...

[Cicero]

Wow. Some great comments on Krugman. And the admission that the only thing that really works, and works quickly, is tax cuts: JFK, Reagan, and Bush, to be specific.

[arrogantsob]

That is an odd read. It sounds as though he thinks he is talking to an idiot, which perhaps he is, with the “stuff” and all.

And tax rates and policy is “fiscal” policy.

[Wpin]

I believe he is cognizant of the reporters liberal views. He took “fiscal policy” to mean spending which is probably what the reporter meant anyway.

I am interested in his study of relationship between tax cuts and economic growth. We KNOW that there is a direct cause and affect and we know why. But, it has never really been fully measured...pretty complicated task.