Tuesday, March 28, 2017

Color Me Unsurprised


The Atlantic:

In 1990, President George H. W. Bush raised taxes, and GDP growth increased over the next five years. In 1993, President Bill Clinton raised the top marginal tax rate, and GDP growth increased over the next five years. In 2001 and 2003, President Bush cut taxes, and we faced a disappointing expansion followed by a Great Recession.

Does this story prove that raising taxes helps GDP? No. Does it prove that cutting taxes hurts GDP? No.

But it does suggest that there is a lot more to an economy than taxes, and that slashing taxes is not a guaranteed way to accelerate economic growth.

And there's still that nagging little finding from years ago - repeatedly reaffirmed to reach or exceed the 95% certainty threshold - that for every $1 solely in tax cuts, we get about 59¢ in Net Economic Stimulus and for every $1 solely in direct government spending (eg: infrastructure) we can count on $1.19 in Net Economic Stimulus.

Call me crazy, but if my broker comes to me trying to sell me on the idea that making 60¢ (kinda the same as losing 40¢) is a better deal than making $1.20, I'm gonna bounce that butthead outa my office so fast his feet won't even touch the ground.

Good old-fashioned Keynesian economics - cuz it works, dummy.

Tax policy is an important piece of an economic strategy, but we've let it get out of balance.

Water the roots, not the leaves.

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