ABSTRACT
This chapter explores some of the major dilemmas and constraints in contemporary economic policymaking. Efforts to rationalize and coordinate policy decisions are handicapped by disagreement among economists and practitioners about economic theory. The chapter focuses on some of the most important contemporary aspects of that dilemma: the political and economic constraints that complicate contemporary economic policymaking. Some constraints impose such significant roadblocks to the pursuit of rational economic policy that they loom as monsters over the policymaking process. The chapter discusses three of them: the entitlement monster, the pork-barrel monster, and the deficit monster. Traditional Keynesian policies of higher spending or lower taxes wont eliminate it; neither will monetarist prescriptions for stable money growth or supply-side proposals for tax cuts on corporate income. The natural rate hypothesis depicted here suggests that Keynesian approaches are doomed to fail.
