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- Sep 23, 2011
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I agree...for the most part. We still have decades to compare to we can also compare with tax policies to other countries. Conservatives point to Sweden and I agree with the fact that Sweden lowering their top rate from something like 90% to 75% increased revenue. At the extreme yes it can make an impact. At the same time we can point to nations like Germany with higher rates who are definately competitive with the US when it comes to growth. I have no problem with people arguing over tax policy. That's how we should determine tax policy...through debate over the merits and costs over changes to the tax code. My issue is this crazy idea that lower taxes have this massive upside (spur economic growth) and no downside (lower taxes offset by that growth). That's just wrong. It's a faulty "have your cake and eat" it view.The hints we take from the past have to keep in mind some of the major economic factors about the past that no longer apply. Comparing monetary policy from the 19th century to today's monetary policies is difficult because we now have a federal reserve and a fiat currency. That makes a HUGE difference. Comparing income tax rates from the 50s to the tax rates today is difficult because we were post-WWII but pre-globalization. That's a HUGE difference.
In theory it most certainly could, in the very same way that any other stimulus could. The COST of a stimulus has be to offset by the economic activity it stirs up. It simply does not do this in every case. We're seeing that right now. In that sense it works just like any other stimulant (e.g. coffee, amphetamines, etc.). You enjoy one of your first coffees, it can wake you up, give you all sorts of energy, focus, etc. But if you keep drinking and drinking it, more frequently and in higher and higher quantities, it eventually loses its potency, and eventually you'll have issues with tolerance, dependence and withdrawal and the "fix" becomes the new problem.
I do agree that differnt measures are more effective in different situations. I hold the view of the President...that tax cuts have become the cure all to the right. The problem with the rights "cure all" is it's not even related to the symptoms. We have a demand problem not a capital investment problem. Tax cuts for the middle class have an impact but there's not companies out there starving for capital.
As for a stimulus...there are times a stimulus wouldn't be beneficial. The thing is economist on the left agree with that.