American Economic Policy, as told by Prof Martin Feldstein at Harvard University: Lecture 4, Obama’s response to the great recession, real GDP measurement issues and America’s middle class is doing better than you think

I missed class on February 4th (my bad) when Martin Feldstein of Harvard University gave the 4th lecture of his course “American Economic Policy,” but fortunately my classmate Matthew Tyler took notes and kindly accepted an invitation to post them as a guest on this blog. He also offers some personal reflections on what it feels like to be a left of center observer in a class taught by a self-avowed “conservative economist.” You can reach Matthew on twitter @Matt_B_Tyler .

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Feldstein takes to the podium on a relatively mild Cambridge morning for this term’s fourth American Economic Policy lecture. The crowd has thinned slightly since day one, although the rapid tapping of laptop keys throughout suggests those who remain hang on every word. Like sponges, the economists of the future are absorbing the insights of a distinguished five decade career. Today, these eager young minds cover much ground: reflections on the Obama administration’s response to the great recession; the accuracy of real GDP measures; and skepticism regarding the size of the inequality problem in the United States.

It’s December 2008. The National Bureau of Economic Research has just declared the American economy has been in recession for almost 12 months. Both fiscal and monetary policy responses are falling short. $78 billion of tax rebates introduced by President Bush generated only $20 billion of additional consumer spending which was far less than the multiplier predicted by Feldstein, Summers and others. Similarly, traditional monetary policy is not working as the crisis was not caused by rising interest rates.

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