The Curious Economics Of Tax Cuts
by Vince?Daliessio
Felix Rohatyn saved the city of New York from imminent collapse in the 1970's. He restructured the city's debt in creative ways to avoid default, while still allowing the city to pursue its bloated welfarism. So he obviously knows a thing or two about economics. This statement in today's WSJ is all the more puzzling;
"The Bush administration('s)...domestic economic policies consisted of large transfers of wealth to upper-income Americans through tax cuts..."
So wait - did we use the tax cut as subterfuge to give (more) welfare payments to the "rich"? Or did we simply allow them to keep more of their own money?
http://online.wsj.com/article/0,,SB109028716502668131,00.html?mod=opinion%5Fmain%5Fcommentaries
Comments
Rohatyn, far from being an antidote to militarism, wants us to strengthen NATO and the UN, arguably the two worst things to enhance.
Friedman also was once asked about the "Laffer Curve", which describes a phenomenon where cutting taxes may actually increase net government revenues, assuming greater tax efficiency by increasing productivity. When asked about what this seemingly paradoxical effect meant, he said "it means you haven't cut taxes enough!". Friedman assumed that even in a controlled free-money economy, keeping the rate of increase low would keep the inflation from becoming an economic drain or screwing up other things. What I think monetarists fail to realize is that there is SO much funny money out there, there is NO predicting its effects anymore.
I agree - gee whiz, how can we discuss the value of tax cuts WITHOUT serious discussion of reductions in the spending side!!!
Another thing to understand is that when taxes are cut but spending still rises, the difference gets made up somehow. With such a measley tax cut, it could not have been made up from increased production due to more investment nor was it enough to make a noticable increase in capital expenditures. Truth is, the hole in congress' pocket was filled in with an expansion of the money supply. Therefore, we will all be paying for this one forever. This also illustrates that, contrary to what Friedman said, tax cuts do not decrease spending...at least not any more.
Check the last paragraph. This guy swooned over FDR back in the day. He should be taken about as seriously as Albert Hunt.
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