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This paper focuses on two books that Robert Heilbroner wrote with Peter Bernstein on public finance – A Primer on Government Spending (1963) and The Debt and the Deficit (1989). It also discusses how the economic world changed between the early 1960s and the late 1980s, and how these changes affected their books. Primer introduced Keynesian economics, and the possibility that government policy and deficits could be forces for good in the world. Debt focused exclusively on government deficits and public debt. Changing circumstances made this work a more difficult undertaking. During the late 1950s and early 1960s, government budget deficits were small, growth was sluggish, and Keynesianism was the dominant paradigm in macroeconomics. Primer explained Keynesian public finance, why tax cuts would spur spending and growth, and why we should not worry about government debt under these circumstances. By the 1980s, Keynes was vanquished, deficits were ballooning, and Keynesian public finance was under attack. Contrary to the conventional wisdom at the time, Debt advocated government deficits along the lines proposed by Keynes but not along the lines enacted during the Reagan administration. Nonetheless, there were many similarities in these two works. Both made a case for an active government role in creating a good society; and both argued that when done correctly deficit spending created no economic problems and had many benefits.

Economists usually shy away from talking about power. They assume an economy comprised of many small and medium-sized firms, each competing for consumer dollars. This circumvents the problem of economic power. John Kenneth Galbraith, however, refused to ignore power. It stood at the center of his economics, and he saw it as a key reason the US economy thrived in the years following World War II (WWII). This chapter examines Galbraith’s changing views regarding economic power. American Capitalism explains how countervailing power, or power on the other side of the market, solves the problem of economic power. In The New Industrial State, scientists and educated managers within the firm (the technostructure) mitigate the negative consequences of economic power wielded by large firms. The Affluent Society and Economics and the Public Purpose look to the government as the main check on corporate power. It does this through labor legislation or programs such as the New Deal and Fair Deal. This chapter then evaluates the different solutions Galbraith proffered to the problem of economic power. It contends that Galbraith got three things right when analyzing economic power. First, we no longer live in a world of scarcity due to oligopolistic firms. Second, capitalism was different in the post-WWII era because the US economy thrived and gains were shared widely. Third, Galbraith understood that power was unequally distributed – both between the public and private sectors and within the private sector itself. On the other hand, Galbraith was overly optimistic in believing the market economy or the public sector could counter corporate power.

Keynes taught us in The General Theory that neither economic depressions nor fluctuations were inevitable. If nothing is done, these problems would continue. However, by the judicious employment of economic policies, these problems could be mitigated, if not totally remedied.

This paper seeks compare the current financial and economic problems with the problems facing the world economy in the 1930s.

The paper argues that the Great Depression and the current problems have similar causes – excessive speculation, leading to a financial collapse that then results in an economic collapse. It then looks at the work of John Maynard Keynes to help solve the current problems.

The paper advocates a large public works program plus a number of policies to help US homeowners and thereby stabilize housing prices.

The paper provides a way out of the current economic and financial problems, and a way to avoid another Great Depression.

Argues that while an expenditure tax would increase the complexity and administrative burdens of taxation, these problems are not overwhelming. The problems which have led others to conclude that an expenditure tax is infeasible, or would result in gross inequities, are not insuperable. At worst they can be handled with a little ingenuity and a suitable transition scheme. The case for or against an expenditure tax must rest on whether the economic benefits of adopting such a tax exceed the minor administrative costs of the tax. The expenditure tax cannot be rejected as infeasible merely because of practical or administrative problems.