November 30, 2003

GIVE US BACK OUR MONEY:

As Stimulus, Tax Cuts May Soon Go Awry (LOUIS UCHITELLE, 11/30/03. NY Times)

LAUDING the Bush tax cuts isn't easy. They have turned a comfortable budget surplus into a constraining deficit, and they are enriching the wealthy far more than families with only five-figure incomes.

The one mitigating factor is stimulus. The tax cuts are helping to revive the economy by putting more spending money into people's pockets. But even that will soon backfire. [...]

Hyped-up entrepreneurs are indeed a benefit, but when it comes to lifting the economy, 70 years of experience has demonstrated that rising demand is crucial, and must come first. Only then do suppliers really become active, to satisfy the customers knocking on their doors.

THE Bush tax cuts encourage this customer demand, though not efficiently. They work best if every dollar of forgiven taxes is spent. Unfortunately, only a third is being spent, according to Joel Slemrod and his colleagues at the Office of Tax Policy Research at the University of Michigan. The rest has been saved or used to pay down debt, the office found in recent surveys.

By this reckoning, the Bush tax cuts will not do much to lift the economy. The $117 billion in fiscal 2003 gives birth to only $40 billion in effective stimulus. Much more of the cuts, perhaps every nickel, would have been spent if the money had been channeled to the states instead, to pay the salaries of teachers who were fired to balance budgets. The economy surged in the third quarter, but as Mr. Slemrod notes, "the tax cuts were not a major part of that growth."


This is pretty much the definitive exhibit in the case for the Timesmen not getting it. The money is ours, not the government's. If letting us have it back produces some of the kind of stimulus he's talking about, that's great; such economic benefits are worthwhile. But the primary purpose of tax cutting is moral, to return what's rightfully ours.

Posted by Orrin Judd at November 30, 2003 5:54 PM
Comments

Orrin, the debt is yours also.

Posted by: Robert D at November 30, 2003 7:31 PM

So he shouldn't complain about being taxed, then?

I would counter that debt belongs to an overweening Congress, Democrat & Republican, who would learn more thrifty ways if they understood higher taxes meant lost elections.

Posted by: Twn at November 30, 2003 7:41 PM

Yes, but let's not teach them that higher spending and lower taxes will guarantee election victory. The politicians will be no more disciplined than we as voters are willing to be. We will be taxed one way or another for every dime that the government spends. If not through income taxes, then through the devaluation of the dollar through inflation that unrestricted money creation to pay off the debt will generate.

Posted by: Robert D at November 30, 2003 8:34 PM

Robert:

I'm pro-debt. I think we should just run it up and then repudiate it. What's anyone going to do to us?

Posted by: OJ at November 30, 2003 8:38 PM

At least we won't have to worry about the tax cuts being inflationary assuming his theory plays out.

Posted by: Genecis at November 30, 2003 9:09 PM

Leftists believe they can repeal the law of supply and demand.

OJ thinks he can repeal cause and effect.

Posted by: Jeff Guinn at December 1, 2003 8:26 AM

Interesting, declare a Year of Jubilee. What effect?

Posted by: jefferson park at December 1, 2003 1:42 PM

A lot of Japanese would feel very old, very fast.

The French would complain about unilateralism (and then do the same thing the next day).

The NYT would collectively collapse.

I'm sure there's more, but that is just for a start.

Posted by: jim hamlen at December 1, 2003 10:59 PM

That's right. I forgot. None of the debtholders are American.

Posted by: Jeff Guinn at December 2, 2003 6:47 AM

Jeff:

Everyone always pays lip service to the idea of not passing the debt on to successive generations--this is a chance for debtholders to prove they're serious about that.

Posted by: OJ at December 2, 2003 8:34 AM

OJ, are you nostalgic for the Weimar Republic? Are you itching to replace your wallet with a wheelbarrow?

Posted by: Robert D at December 2, 2003 8:39 PM

Robert:

Actually, yes. A bout of hyperinflation would enable the Wife and I to pay off our exorbitant educational loans and our mortgage.

Posted by: oj at December 2, 2003 9:29 PM
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