The idea that you can increase taxes and stimulate the economy is pretty damn stupid.
– Edward Prescott , Arizona State University professor, shared the 2004 Nobel Prize for economics.
Thanks to Instapundit.
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Samizdata quote of the dayOctober 19th, 2004 |
 6 comments to Samizdata quote of the day |
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Is it as stupid as borrowing huge amounts of money to stimulate the economy? I’ve seen the economic analysis on those actions, and it seems that those deficits always require tax increases to become sustainable (since no political party has the guts to actually decrease the size of government).
I’ll generally settle for “pretty damn stupid” when only offered the alternative choice of “extremely irresponsible”
Re: stimulating the econoomy through taxing or borrowing.
Both are stupid.
Alan –
Agreed,
I love the way people make it out to be one or the other. Why not stop taking our money AND not spending what you don’t have.
What a radical thought…
The choice is between cutting taxes and not cutting taxes. Given that choice in the context of the current world, I would always choose the former.
As Ronald Reagan observed, government tends to spend all tax revenues plus whatever it thinks it can borrow. If you cut taxes, that puts pressure on elected representatives to moderate their spending somewhat.
Reagan cut taxes and ran up the deficit, including a big military build-up. Remember that?
It worked. The US economy grew, Communism collapsed, and even the next Democrat elected president tried to control the growth of government (albeit primarily by cutting defense spending and only after the Republicans defeated his wife’s candidacy for Medical Czar).
It’s not about cutting taxes v. raising taxes. It’s about paying taxes now or paying much more taxes later. Reagan’s reckless defence spending combined with his tax cuts ensures that we will be paying for the 80s until the system itself collapses. However good the 80s economy might have been (and even that’s overblown by conservatives), the 80s will be a drag on the 20s, 30s, and 40s of this century. Given the choice between big solvent government and big insolvent government, I’ll take big solvent government.
And no, cutting taxes does not restrain government spending.
– Josh
When I said I favor cutting taxes “in the context of the current world”, I meant that given current marginal tax rates, it is better to cut taxes.
Tax rates matter, and no, it is not simply of question of taxes now or taxes later.
It should be quite clear that tax revenues can actually be reduced by increases in tax rates. There are both short and long run reasons for this. In the short run, people re-arrange their income to avoid taxes when rates are high. In the long run, people simply work and invest (and therefore produce) less when tax rates are high.
If tax rates were too low, I might advocate increasing taxes. But they are not too low in the US or the UK or any other major industrial nation at this time.