4. Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)What I didn't include in my post was the following from Mankiw's post:
"Note that the proposition about fiscal policy (#4) does not distinguish between taxes and spending as the best tool for purposes of macro stabilization. Maybe that question should be added in a future poll. I doubt, however, that the answer would make it onto this list of widely agreed upon propositions."Our government isn't very good at distinguishing between taxes or spending as the best tool either. What happened during President Bush's terms was a combination of both fiscal policies. Remember, the US was already in a recession when Pres. Bush took office. That recession was exacerbated by our last "worst economic crisis in decades" brought about by 9/11. The government responded by cutting taxes, increasing tax rebates to the poor, and increasing spending like never before.
Now we have a new "worst economic crisis in decades" and our government is responding in much the same way. Huge government spending coupled with tax cuts. A strategy destined to increase our national debt like never before. Again.
To those opposed to the huge increase in government spending, many are asking where were you 8 years ago when Republicans did the same thing. First, I think it's important to point out that even Republicans don't like national Republicans right now - largely because of the spending of the last 8 years. But perhaps more educational is to say that I suppose national Republicans are now doing exactly what national Democrats did during the President Bush years. I distinctly remember our current Speaker of the House Nancy Pelosi pledging on Meet the Press that Democrats would reinstate Pay As You Go spending habits should they retake Congress. She and her colleagues were outraged (outraged!) at the deficit spending that Republicans were doing.
The pendulum of power may have swung since then, but the economic policies, and opposing party political rhetoric, haven't really changed all that much.