Economic Myths
Peterson, Wallace C.
Economic Myths OUR OVERLOADED ECONOMY by Wallace C. Peterson M.E. Sharpe Inc. 240 pp. $14.50. The death of Keynesian economics is cheerfully proclaimed by right-wing economists. But the popular...
...As Peterson demonstrates, transfers do not represent Government use of resources, but simply the redistribution of money...
...Peterson writes: "Millions of our citizens are . . . not working at their full potential or [are] simply bored with what they are doing...
...Myth number one...
...The bogeyman of bloated Government spending results from two errors in accounting...
...it is simply a reinforcement of the already growing importance of state and local government...
...The distribution of wealth also remains unchanged since 1945...
...Myth number three...
...Peterson makes a quick work of current political posturing and shows that Federal outlays for goods and services have hardly changed since 1948, rising from 2.3 per cent to 2.5 per cent of GNP...
...Using a minimum of economic jargon and an abundance of to-the-point tables, this book updates in a highly reasonable manner the message of Keynes's 1936 classic, The General Theory...
...Under Peterson's plan, low-income families would receive income supplements, while all family income above $16,800 would be taxed at a marginal rate of 50 per cent...
...economy even though it is cited in the first paragraph of the book's preface...
...Another supply-side lesson also is instructive...
...Production takes place in the home as well as in the factory, a point some supply-siders make in their frightening appeals to patriarchy in their economic blueprints...
...families have no wealth once liabilities are deducted, while 1 per cent of all families control 25 per cent of the nation's personal wealth...
...Peterson's prescriptions for what ails us are reserved for his final chapter, with a mimic's nod (perhaps) to Keynes's "Concluding Notes" in The General Theory...
...The income tax proposal, for example, is an updated version of Presidential candidate George McGovern's 1972 campaign promise...
...Even though Kemp and other supply-siders are wrong when they predict greatly increased work effort as a result of Reagan's tax cut, we still cannot ignore the supply-side message that a 50 per cent marginal tax rate would cause moderate income workers to balk at additional hours...
...One clear exposition of modern-day Keynesianism is Our Overloaded Economy by Wallace C. Peterson, a professor of economics at the University of Nebraska...
...Traditional monetary and fiscal policies as pursued by Presidents Nixon, Ford, Carter, and now Reagan cannot cope with high unemployment and inflation...
...The suggestions themselves—a negative income tax, wage and price controls, and Federal registration of corporations—would no doubt meet with the approval of the Cambridge don...
...Myth number two...
...Even in the post-World War II go-go era there were only four years—1952, 1953, 1966, and 1967—when unemployment was below 4 per cent at the same time that inflation was kept under 3 per cent...
...Such carping aside, however, Our Overloaded Economy succeeds in much the same way as Keynes's The General Theory...
...Peterson's concern is our current economic crisis, not the Great Depression...
...His silence on matters of production lead him to overlook a key problem in the U.S...
...Poverty has been abolished in the United States...
...Then, although Peterson is interested in the power wielded by corporate management, he ignores corporate domination of the workplace and the decline in job satisfaction, productivity, and safety it has led to...
...Just as Keynes refuted the economic politics of Herbert Hoover, Peterson uncovers the myths parading as articles of faith in Reaganomics...
...Jack Kemp, I'm afraid, would have a field day telling the hometown folk in Buffalo about Peterson's 50 per cent tax on their overtime pay...
...Second, the figures for Government spending are often misleading because they include state and local spending which, unlike the Federal costs for goods and services, has grown twice as fast as the entire economy since 1948...
...Not coincidentally, Peterson ran unsuccessfully for the Nebraska Democratic nomination for the U.S...
...Inexplicably there is no index, so it takes a most careful reading to know for certain...
...Both diligently undermine the basis of conservative orthodoxy...
...Such unreconstructed liberalism is refreshing at a time when some liberals are clutching at the straws of neoconservatism and worshiping at the temple of free enterprise...
...Federal spending is too high...
...Unfortunately, however, Peterson's recommendations are especially vulnerable to supply-side sniping...
...Those who would rebut the supply-side position must address issues of family roles and childrearing...
...Peterson argues that these relative comparisons are pertinent, and much more telling than the absolute measures of poverty used by the Government, because the expectations of the poor are continually driven upward in our consumption-oriented society...
...According to Peterson, unemployment and inflation are the expected by-products of an economy dominated by large corporations...
...the problems are built into the economy...
...Sixty percent of all U.S...
...Peterson avoids them entirely...
...First, transfer payments, which have increased dramatically since the Truman years, are routinely—and mistakenly—included in the Government spending column...
...Senate in the same year...
...With the ascendancy of Reaganomics, a Keynesianism for our times cries to be born...
...But the popular tide of the obituaries notwithstanding, Keynesianism is alive and well...
...Supply-siders are sweet on anachronistic individual entrepreneurs and usually oblivious to the modern-day corporation, and so it is possible to miss an underlying truth in their message: Our economy needs to produce before it can distribute...
...The poorest 20 per cent of all families continue to receive about 5 per cent of all money income even when Social Security, unemployment, and welfare payments are figured in...
...In relation to everyone else, the poor in the United States are no better off than they were twenty-five years ago...
...Left to its own devices, capitalism is a smooth working system...
...Mark H. Maier (Mark H. Maier teaches economics at the University of New Rochelle in New York...
...The "New Federalism," it turns out, is not new...
...Peterson's attention is single-mindedly on questions of distribution...
Vol. 46 • May 1982 • No. 5
