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Politics : Just the Facts, Ma'am: A Compendium of Liberal Fiction -- Ignore unavailable to you. Want to Upgrade?

To: Lazarus_Long who wrote (48859)	6/8/2006 8:33:29 PM
From: TimF	Read Replies (2) \| Respond to of 90947

If its a draw I have proved my point, since my point is mainly that the idea that lower tax rates can possibly pay for themselves and often at least increase the growth rate long term is not "One of the Worst Ideas in Economics". For it to reasonably be considered one of the worst ideas I think it would have to be obviously wrong (at least to reasonable people with a decent grounding in economics) and not just something that reasonable people can disagree on an that can not be proven. Part of arguing against his assertion lead to the counter assertion that over the long run some tax cuts do indeed pay for themselves and that pay for themselves or not tax cuts will tend to lead to more economic growth, when considered in isolation. (Other factors, including deficits can have an opposing effect on economic growth, that may at times be larger than the direct economic effect from tax cuts.) I'm surprised that you would disagree with that idea, but even if it isn't taken as established, or even likely, just "disputed and uncertain" would be enough to show Wheelan's overly strong statement to be incorrect. I'm still not totally sure if you even disagree with the statement two paragraphs above, or if you are disagreeing with the argument that Wheelan set up as a straw man - That tax cuts always lead to economic growth and because of this usually "pay for themselves" even in the short run under almost any circumstances. Your talk of cutting the rates from "4% to 3.5%", suggests you are defending the assault on this strawman. Its not unreasonably to disagree with the strawman idea, but that idea does not fit Wheelan's categorization as one that provide "bogus intellectual cover for bad policy, year after year, decade after decade". The idea that tax cuts always "pay for themselves" in the short run not matter how low the rate or how much is spent, or what other circumstances apply, is not one that has ever been widely supported. That idea would rather be what he describes as one of the most outlandish ideas and would not receive a lot more support than his example of "stock prices are controlled by aliens". (Actually capital gains tax cuts often do pay for themselves in the short run by encouraging gains to be realized, then they result in less revenue in the medium run because of the lower rates, and most likely result in more revenue in the long run because they encourage investment but capital gains cuts are a special case, and also the positive short run effect on revenue probably can not be repeated with multiple cuts in rapid succession, or with rates that are already very low.) Prep for WW2 caused GDP to increase fast. Nothing like making things to get blown up. :-) If building tanks and ships and planes and bombs had such a clear positive effect than any time we needed to ramp up the economy we would just order up some more. bastiat.org en.wikipedia.org It might have a positive short term stimulus effect, but you could get that by paying people to dig holes and fill them in again. Of course filed in holes aren't generally useful in waging war and tanks are, but the creation and use of the tanks take resources out of the rest of the economy. Which doesn't mean I'm against building tanks, esp. when something like WWII is coming up, but I wouldn't call the practice the savior of our economy (unless the military might keeps someone else from destroying our economy but that's saving it in a different way).