A great history of monetary and fiscal policy

 

If you had to read one book on monetary and fiscal policy in the US, Blinder's easy to read work, A Monetary and Fiscal History of the United States 1961-2021 will fit the bill. This book is clear, at times humorous, and always insightful. Blinder writes with confidence as someone who has been studying this topic for decades as well as having a ringside seat as both an academic and policymaker. 

Blinder is clearly a Keynesian, so he is sympathetic to its policy prescriptions, yet his review of the last five decades is very compelling. He makes the case that policy, whether fiscal or monetary, is driven by politics. Forget that the Fed is independent, it is political which at times pushes it to independent policy but at other times, it will be consistent with fiscal policy. Fiscal policy through the lens of Keynesianism, has seen ebbs and flows between acceptance and avoidance; however, there is now a clear bias toward deficit financing whether from Republicans or Democrats. All may not call it that, but the result is that the political process does not allow for automatic stabilization that will smooth deficits. Republicans can act like Keynesians as well as any Democrat. It is not always a pretty picture of thoughtful policymaking. The Fed is said to be independent which at time allows for quick action, yet monetary policy cannot solve all problems and the pressure not the Fed is strong. 

I can say that a learned a good amount of monetary and fiscal history from this book. Policymaking is complex and the theories of academic economists have often not been helpful in this process. I have lived many of the events, but Blinder has a great way of synthesizing and summarizing the key issues at different times which makes for good reading. Macro finance is often about knowing how to place current events in context and Blinder's book will help you do it.

Other readings that place this book in context:

• Friedman, Milton, & Anna J. Schwartz. 1963. A Monetary History of the United States, 1867-1960. Princeton: Princeton University Press.

• Stein, Herbert. 1969. The Fiscal Revolution in America: Policy in Pursuit of Reality. Chicago: University of Chicago Press.