Deflation Message Board - Msg: 18255639

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Non-Tech : Deflation

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To: JF Quinnelly who wrote (163)	11/20/2002 1:52:00 PM
From: ahhaha	Read Replies (4) of 621

In 1980 I went down to Stanford to give a seminar in the application of macroeconomics to investment. After several presentations both Taylor and Friedman decided to sit in on my class. They wanted to hear someone from the outside pushing the concept of supply side tax cuts and fixed monetary growth. Friedman didn't care for the idea that cutting taxes of the rich went farther than any other way to stimulate non-inflationary output. I had been preaching such cuts since 1973 when Mundell convinced me that cutting taxes was the only way to remove constraints that were aggravating inflation under the force of monetary stimulus. Mundell didn't specifically have targeted tax cuts in mind. It was elementary to recognize that the rich have high marginal disutility for marginal increases in net income, and so they invest far more than others with the extra income they receive from tax cuts and they pay far more in income taxes. Friedman didn't believe that mechanism would work to a meaningful extent. My counter argument was simply that the rich had been oppressed for so long by the 'crats that their behavior would be radically altered by a small change in their effective tax rate. The Reagan tax cuts proved me right.

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