A Clarifying Week

Kandahar said:

It's not the government spending that's the problem; government spending is usually good for the economy (with a few exceptions). It's the taxes and/or deficit that causes economic harm

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hmmm, i would say they are two faces of the same coin: you can't spend money that you didn't print, borrow, or tax, and all three of those things have immediately harmful effects; either diluting the worth of money or reducing resources available for market investment and growth. as government is less effecient at allocating capital than the market, government spending represents moving resources from avenues that would be more productive, and into venues that are less so.

This, of course, would involve looking at the specific type of government spending, and the specific method of funding it. Some taxes are more harmful than others, and some forms of government spending are better than others. In my view, the government does a pretty good job on the spending side...

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really? expensive subsidies to make food more expensive? $300 for a toilet seat for the DOD? robot bee studies? compensation packages for employees far and above the private sector?

the types of spending we do are mostly things that bring a substantial benefit for the economy - human services like education/health, and infrastructure like transportation/communication. I do think we spend too much on defense, public unions, and retirement though...these are much less economically beneficial.

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true.

On the financing side, the picture is a bit mixed. In general, we shouldn't run a sustained deficit (although with unemployment as high as it is, it's OK in the short term). As for the forms of taxation, some are better than others. The taxes that harm the economy the least are the ones that minimize deadweight loss. Estate taxes, luxury taxes, land/property taxes, and income taxes on the wealthy are the best ways to do this. The worst forms of taxation are sales taxes, corporate taxes, and payroll taxes, because they carry substantial deadweight losses.

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i think you are missing a rather critical pieces here; which is the general tendency of government to collect 18-19% of GDP in revenue. you can hike up tax rates on the wealthy all you please; you wont' get any extra revenue from it. in fact, as they move their resources to less ecient allocations to reduce their tax exposure, you could get less as economic growth slows. the question then becomes (as you identify) the means, specifically the compliance costs (ours are currently over 300Bn a year), as well as the behaviors that you are encouraging/discouraging.

In terms of reining in entitlement spending, I would be receptive to any Republican proposals to raise the retirement age, means-test social security, nudge the public toward high-deductible health insurance plans, tax health benefits as regular income (which could, if necessary, be made revenue-neutral by cutting the marginal tax rates), or reform our malpractice laws.

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good ideas all. to avoid hiking healthcare prices further, however, would you be receptive instead to Republican efforts to extend the same tax advantages to individual, as well as corporate health insurance purchases? in that manner we could move towards an individual market with portable policies, but without lowering everyone's real income overnight.

cpwill said:

firstly, the republican party in the 80's was not the republican party of today; todays' republicans are alot more economically conservative. secondly, the GOP generally supported the Presidents' increasing defense spending because we wanted to actually win the Cold War. Thirdly, the Democrats controlled Congress.

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So Reagan was a liberal?
The republicans of '01 to '06 were not fiscally conservative. They are the same republicans of today.