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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: DuckTapeSunroof who wrote (43432)	5/24/2010 8:07:36 PM
From: TimF	Read Replies (1) \| Respond to of 71588

"Austerity measures" they introduced were a COMBINATION of REDUCED SPENDING and HIGHER TAXES AND FEES. (I did not ever say that it was just spending cuts. I clearly stated "austerity measures. You seem to have missed that....) I said, at least once, perhaps more, in my posts to you that I was treating "austerity measures" as meaning spending cuts. If that was your real objection, you should have objected then. Now that you have stated this objection I'll reply to it. If your saying the austerity measures increased the deficit you are either saying (not directly, but inescapably implying) 1 - "spending cuts reduced revenue more than they decreased spending" or 2 - Tax increases reduced revenue. The latter is more plausible, but still unlikely in this case, as Ireland's tax rates where still not extremely high, after the increases, probably too low to be past the inflection point on the Laffer curve, esp. since they did not increase corporate or investment taxes. Their corporate tax rate of 12.5%, was and is an important competitive advantage for them. The higher tax rates could decrease economic growth, which could over the long run produce lower revenue, (even small changes in growth over a long period of time can effect eventual net tax receipts much more than the direct effect of major changes in the tax rates), but we haven't had "the long run" since the tax changes where made. They where made last year. The 2nd argument is only slightly implausible, not almost impossible, but "only slightly implausible" is a long shot from "Standard economics" that is "Completely understood by every Irish economist and every politician there" (to use your words from Message 26546466 ). We are still left at the austerity measures as the cause of the large deficit being at least slightly implausible. If they had raised the corporate rate, than in the context of Ireland being a small economy, in the EU, that uses its lower corporate rate to attract investment, I would say the idea that tax rate increased increased the deficit would actually be plausible, but they didn't increase the corporate rate.