More Supply Side

The discussion provoked by Bruce Bartlett's opinion column on "Supply Side Economics" (see earlier post) has continued at Economists View. James Galbraith, who was on the Democratic staff of the Joint Economic Committee of Congress defends the "vulgar Keynesians":

Reaganomics was aimed at enriching the rich and destroying the economic life of working Americans and the poor. And this is no joke: it did exactly that. Recession, unemployment, the wanton and irreversible destruction of major industries and the fiscal base of the cities, the destruction of unions: all that happened. The cost of curing inflation in 1981-82 was enormous, far higher than the airy comments made above concede. We crude Keynesians believed then, and I believe now, that the steps taken were brutal and unnecessary, and that with hard policy work the problem could have been managed in ways that were far less costly, but that were rejected on ideological rather than economic grounds.

Paul Krugman, who was on the staff of the Council of Economic Advisors (yes, Paul Krugman was part of the Reagan Administration!) argues that "Keynesian" views are mis-characterized:

The key thing is that good Keynesianism, as embodied even in undergrad textbooks of the time, was *perfectly OK*: Dornbusch and Fischer, 1978 edition, offered a description of what disinflation would look like that matches the experience of the 80s reasonably well, and the textbook does not seem all that dated even now. The idea that we needed a new doctrine to get our heads straight is just all wrong.

Here's Brad de Long's take.
Separately, Greg Mankiw criticizes the Congressional Budget Office's finding that the effect of tax cuts is small.