Tax Law Professor Paul Caron cites a New York Times op-ed, "Tax Cuts Might Accomplish What Spending Hasn’t", by N. Gregory Mankiw (Harvard University, Department of Economics).
It is the eternal struggle between the supporters of John Maynard Keynes and the supporters of tax cuts:
Keynesian theory says that government spending is more potent than tax policy for jump-starting a stalled economy. The report in January put numbers to this conclusion. It says that an extra dollar of government spending raises GDP by $1.57, while a dollar of tax cuts raises GDP by only 99 cents. The implication is that if we are going to increase the budget deficit to promote growth and jobs, it is better to spend more than tax less.I am probably pushing fair use here, so I will leave it at that and leave the blog post and the article to you to read and to think about and to draw conclusions from.
But various recent studies suggest that conventional wisdom is backward.
One piece of evidence comes from Christina D. Romer, the chairwoman of the president’s Council of Economic Advisers. In work with her husband, David H. Romer, written at the University of California, Berkeley, just months before she took her current job, Ms. Romer found that tax policy has a powerful influence on economic activity. According to the Romers, each dollar of tax cuts has historically raised G.D.P. by about $3 — three times the figure used in the administration report. That is also far greater than most estimates of the effects of government spending.
Regards — Cliff
PS: Hit tip to Instapundit
First of all: Our whole economic/capitalist premise is based on people knowing best what to do with their own money. More than that: To believe that people do not know best what to do with their own money, and that taxing is better than not taxing because of that, is to believe that governments know better than their subjects do, and, if people recall, that was the reason we revolted from England in the first place.
ReplyDeleteThe whole tax-yourself-to-prosperity thing bothers me just as much as trickle-down philanthropy. (aka give money to the rich in order to help the poor).
Well spoken kad barma....well spoken. A critical problem in trying to assess the efficacy of government economic policy decisions is the more or less inbred tendency to cherry pick data to support a particular view.
ReplyDeleteRemember, taxing in America is the primary means for creation and sustainment of government and more government.
We are slowly inching our way to creating a government that is the provider of everything.....and thus....has absolute power.
Neal
Don't forget those that continue to want to tax are the ones with the money. Try to live on $339.00 per week unemployment and see how much more you can be taxed....
ReplyDeleteThe problem was we didn't get into this mess 'with our own money' most of it was borrowing other people's money with inflated property values and credit cards. partially guilty of such a crime.
ReplyDelete