Cato has argued that the '80s recovery was not a Keynsian recovery, but a supply- side recovery, because the inflation rate decelerated during the period. If it were a demand led recovery, prices should have been bid up, exacerbating inflation. Instead, it was a supply led recovery, due to innovation, and improved efficiency and productivity. If that is so, the main stimulus was through tax cuts and deregulation, not deficits.
You are correct, direction of interests rates matters. However, easy credit is generally more favorable to economic growth, and the main argument against deficits is that they bid up interest rates.
I am not an expert on taxes, and do not know if, in the end, calculation became easier. What I do know is that a number of loopholes were closed as a trade- off for lowering marginal rates. Maybe simplification is too optimistic a term, but it sounds like that is what they did.
You are right, the shifting of outlays is, in itself, insignificant. What might have been significant is that it took away some of the incentive for Democrats to raise taxes even more........ |
