(1) It's nice to hear that out of all the "spin doctor trash" I have written, there is a "core", some kind of essence you might consider swallowing as proper treatment.

 

If I'm not mistaken, your conclusion is: Keynesianism + Friedman Monetarism + Supply-Side Reagonomics = "Spin Doctor Trash" Economics.

 

But "the core" of "Spin Doctor Trash" Economics is being practiced by the federal government and the Federal Reserve, and because of this, the economy has been successfully stabilized. Recently, the National Bureau for Economic Research announced that the recession had ended.

 

(2) As mentioned before, federal budget deficits do not pose a serious problem in the current disinflationary environment. There is ample room for further tax cuts, interest rate cuts, and higher deficit financing, if necessary, to stimulate GDP growth and job creation.

 

On July 23, 2003, Fed governor Ben Bernanke said that even if GDP grows 4% in 2004, standard calculations predict inflation, using the Fed's preferred measure (CPI excluding food and energy) could fall to 0.7% by the end of 2004.

 

Perhaps, this is because potential GDP (i.e. the economy's potential to produce goods and services) continues to grow and continues to exceed aggregate demand by a wide (or widening) gap.

 

Therefore, he would like to see the Fed keep the short-term Fed Funds rate low for an extended period of time and purchase Treasury bonds to inject more cash into the banking system. He even calls for the use of derivatives to ensure cheap long-term financing for businesses.

 

(3) Under Japanese law, the Bank of Japan can purchase private-sector equities. In fact, it has already done so. Under U.S. law, the Federal Reserve is not allowed to purchase the shares of publicly listed companies.

 

Yet, in 2001 when there was hope for continued budget surpluses, Fed Chairman Alan Greenspan said if the national debt was paid down, continued budget surpluses would force the government to purchase the shares of private-sector corporations.

 

I take this as an indication that the U.S. federal government legally has the power to purchase stocks and shares to stabilize the stock market even with money borrowed from the Federal Reserve, if and when this becomes necessary.  

 

(4) My feeling is that conservatives basically don't like Keynesianism, because they suspect it is "Socialist". They call for small government, less government intervention, less government spending, less government regulation, and more natural free-market adjustment (i.e. laissez faire).

 

Whereas Keynesianism points to the reality that government has a role to play in stabilizing the economy and employment. The controversy arises because Keynesianism attaches (probably excessive) importance to government spending and investment programs and public projects (financed by heavy deficits).

 

Conservatives would say such government spending programs tend to be inefficient and should be reduced. I agree inefficient government spending programs should be reduced whether they are financed by tax revenues or by deficits.

 

But I believe the idea of deficit financing of governmental contracts in a disinflationary (or sluggish-growth) environment to help private-sector industries such as defense, health care, etc. boost their earnings and hire workers may still be valid today.

 

The federal government needs defense goods and services anyway. Such necessary spending programs (whether financed by tax revenues or by deficits) should not be regarded as "inefficient". If they help the economy, so much the better.

 

Why yell at a projected budget deficit (US$455 billion for fiscal 2003) that accounts for only 4.2% of GDP in a disinflationary environment and in war times if it were not for partizan reasons? 

 

Don't the left-wing Democrats read modern history? Sixty years ago in 1943 when America was in the middle of another global war, the budget deficit accounted for more than 30% of GDP. So what?

 

(5) Wall Street sentiments reflect the spirits of American society. Thus, it represents not only the interests of business, but also the interests of the entire economy.

 

In short, Wall Street knows what is good for the economy far better than the left-wing Democrats -- the class warriors whose intention is to scare investors, destroy the economy, and then seize political power. 

 

By the way, Wall Street doesn't like corporate CEO's to "raise their own salaries and wages at a rate some 280% faster than allowed to anyone else". Investor advocates are calling for regulations to eliminate such corporate CEO excesses. They believe CEO compensation packages should be approved by shareholders.

 

Again, by the way, supply-side economists call for lower tax rates, because at 35%, current corporate income tax rates are still quite high. If you like, you can raise tax rates to 90%! But then, all businesses would shut down, laying off all their staff and causing the government to receive zero tax revenue.

 

As to "trickle-down" being a laugh, I hear millions and millions of workers laugh in happiness -- not only in China but all over the world -- because of the billions of dollars that have been trickling down on them from U.S. multi-national corporations in the form of capital investments and wage payments, allowing them to have a relatively decent livelihood.

 

What can you offer to the working class to allow them to survive except a bunch of left-wing demagoguery? From my personal experience, I know there is no better alternative to "trickle-down" economics.

 

It is "trickle-down" that has allowed myself and millions of other people to survive in this struggle called life. Those who think they deserve better than "trickle-down" need to prove to the marketplace that they have something that is worth more.

 

For example, you refuse to pay anything for the "spin doctor trash" I write, so I accept that I don't deserve better than "trickle-down". I don't blame you or anybody else.

 

The only thing I can do is to keep on writing "spin doctor trash" until someday the marketplace says, "Now, you're talking, and here's your reward." Until then, "trickle-down" is what I deserve.

 

On the other hand, if one of your books sells more than a million copies (like Ann Coulter's new book "Treason" or Hillary Clinton's book), then, you deserve much more than a little bit of "trickle-down", that is, you've earned your reward. Isn't that fair? 

 

(6) I don't make deficit estimates. I quote estimates from media reports. 

 

Your numerous "estimates" such as "GDP down by $4 trillion per year since 1999"; "deficit level doubled and GDP loss tripled by tax cuts"; "corporate paid taxes cut by 90%"; "U.S. casualty risk up 4% per day"; "zero power vacuum impact within 180 days of U.S. troop withdrawal"; "potential for friendly government up 65% within 30 days of U.S. troop withdrawal" have yet to be independently verified by some expert other than yourself.

 

Tell me who has "the training" to do so.

 

Sincerely,

 

Robert M. Liu