The Biz Bucks Blog provides former Biz Bucks students and other busy professionals with a summary and commentary of seminal articles from the opinion pages of the Wall Street Journal. You can be notified of a new posting by subscribing to the blog (enter email in box on right) or by following on Twitter: @BizBucksGuy.

Breaking the Secret Code of Macroeconomics Lingo (Part II: Keynesians) August 30, 2012 12:00 AM | Tagged as Keynesian, macroeconomics

 Keynesian Principles


John Maynard Keynes was a British economist in the first half of the 20th century. Franklin D. Roosevelt made him famous by using his principles during the Great Depression. His greatest treatise is The General Theory of Employment, Interest and Money (1936).


Keynesians believe government can restore economic health after a recession by increasing government spending and by either tax hikes to pay for the spending or temporary tax reductions of many kinds, such as payroll taxes which put money in the pockets of consumers.  This spending idea therefore focuses on demand in the economy, not supply.


Keynesians believe that $1 of federal spending will create about $1.50 of economic activity. This is the famous Keynesian multiplier. The more we spend, the quicker the recovery from a recession. If our spending doesn’t fix the economy, we didn’t spend enough. See the Biz Bucks Blog: “The Blip President”, Aug. 6, 2012.


Static Scoring


The Congressional Budget Office (CBO) is supposed to be a non-partisan resource to “score” the economic effect of proposed law making.  The CBO is famously Keynesian. The models they use are based on “static” scoring. This means if a tax rate produces a given revenue for the federal fisc, then increasing the tax rate will correspondingly increase that revenue. This is clearly true for the lowest tax rates. Raising low tax rates increase the inflow to government.  In Keynesian models, this effect is essentially linear. Meaning if tax rates were increased to 100%, the inflow to the government would rise to record levels.  The ratio between tax rates and tax revenues remains static, or unchanging, in Keynesian models.


Wall Street Investment Bankers and Other Notable Keynesians


With some exceptions, many economists that reside at universities on the both the east and west coast are Keynesians.  Keynesians are, therefore, nicknamed “salt-water economists” because they reside close to either the Atlantic or the Pacific.


Notable Keynesians are Austin Goolsbee, Paul Krugman, Larry Summers, Alan Blinder, the CBO, and most Wall Street investment-bank economists. Why Wall Street? These large investment banks are at the public trough and need to have “love-ins” with the government.  Some have called this the Political-Financial Complex. They are essentially on the same team and promote the same agenda.  CEOs of these large banks have become Secretary of Treasury. Google “Paulson”. These large banks are ardent capitalists when they make money, but ardent socialists when they don’t. Google “Wall Street Bailouts”.

Posted By The Biz Bucks Guy
Posted in MacroEconomics | 0 Replies

Subscribe to Our Blog

To receive email updates when a new post is made, please enter your email address in the box below and click Subscribe.


Use these key words to search past blogs:



1994 97% Alesina Recession Alinsky Allesina austerity Baloney BAT Binz bird kills Bogle Border Adjustment Tax Brulle Bryce capitalism carbon Carbon Dioxide CBO CFTC chains China Churchill Climate Climate Change Clinton Comparative Advantage Crichton Cronyism Cummins Curry Darwin Death panel demographics population economics Denier derivatives Dodd-Frank Drug dynamic Dynamic Scoring education electric car Energy Energy Policy Enron Debt Entitlements Eugenics Fat Fry Flat Earthers fracking free markets free trade Free Trade E-Verify Free Trade Zoellick Freedom Heritage Foundation Friedman gas lines Gas Prices glaciers Global Warming Global Warming Sustainability global warming subsidies IMF Globalization Trade God Google Gore Gramm Green Blob Grifo Groupthink Growth Hannity Hayek Hostess Hybrid Immigration Imports index funds Indexing Intellectual Denial investing investment IPCC JFK Joint Tax Kennedy Kerry Keynes Keynesian Keynesian Tax Cuts King Barak Bird Kills Koch Koonin Laffer Lamar Smith Lomborg macroeconomics macroeconomics;static; dynamic MACT Makiel markets Marxist medical care minimum wage Mitchell Model T Moore Morgenthau Navarro Neumark NOAA NY Times Obamacare ObamaCare Rove Health Insurance O'Reilly participation rate Patrick Moore peer review Peer Review EPA Piketty Pipelines plywood Presidential authority Price Controls Pruitt Racial divide Rare Earth Reagan Recession REE Renewable Portfolio Standards Renewables Ricardo Ridley robotics RPS Ryan Schlaff Science science integrity scoring Settled Science Shaffer shortages socialism socialized medicine Solar Panels Solvaldi Sovaldi static steel STEM Stephens Steyer stimulus subsidies subsidy sugar Supreme Creator tax policy tax reform Taylor territorial taxes corporate taxes Tesla Trade train wreck Trump unemployment wages Wind wind power women Zuckerman