Friday, January 25, 2008
Keynes is STILL dead
Despite having been thoroughly discredited years ago, Keynesianism rears its head every so often to wreak havoc on the nation's body economic.
Practically each and every Democrat in the U.S. Congress is a card-carrying Keynesian; and each and every one of them has nothing but good things to say about Keynes' demand-side economic theories. Thus, when the economy starts slowin', Democrats trot out pump-priming schemes like tax "rebates" and targeted tax cuts.
In 2001, Democrats proposed tax rebates in response to that year's recession -- a recession they'd denied even existed as St. Bill Clinton was turning over the keys to 1600 Pennsylvania Avenue. The tax rebates did nothing to counter the recession, and economic growth remained slow until President Bush and Congressional Republicans enacted supply-side cuts in marginal tax rates. Allow this chart to demonstrate:
A growing band of economists, pundits and politicians seemed determined to talk the economy down until it records negative growth this year. As a sort of pre-emptive strike against the 2008 recession, Democrats have proposed various tax rebates (including rebates to folks who pay no federal income taxes). Not wanting to look uncaring, Republicans unfortunately have joined the tax rebate bandwagon ... just like they did in 2001.
For the past two weeks, the Wall Street Journal has done an amazing job destroying the canard that tax rebates spur economic growth. Today's lead editorial, "Re-Election Stimulus," does some damn fine canard-bustin', and then some :
"As for the economics, oh my. The most this temporary tax cut will do is goose consumer spending for a quarter or two this year. Since the IRS is saying it won't be able to cut the checks until midyear, any recession might well be over, if it even begins. The money to pay for these rebates has to come from somewhere, which means from other taxpayers or from bondholders who lend money to the Treasury. Either way, Congress and the White House are taking money from someone to pass out to someone else. The income effects are thus a wash, as the economists put it, while the substitution effects (higher taxes on the best income producers to finance consumption among the lowest) are negative."
Don't expect Washington lawmakers to pay attention to voices of reason like the Wall Street Journal's editorial page. Indeed, facts and logic are the first things tossed out of the window when elections are close at hand. You see, whenever times get tough, Washington pols have an all-consuming need to be seen as doing something. Even if the something actually accomplishes nothing.
Practically each and every Democrat in the U.S. Congress is a card-carrying Keynesian; and each and every one of them has nothing but good things to say about Keynes' demand-side economic theories. Thus, when the economy starts slowin', Democrats trot out pump-priming schemes like tax "rebates" and targeted tax cuts.
In 2001, Democrats proposed tax rebates in response to that year's recession -- a recession they'd denied even existed as St. Bill Clinton was turning over the keys to 1600 Pennsylvania Avenue. The tax rebates did nothing to counter the recession, and economic growth remained slow until President Bush and Congressional Republicans enacted supply-side cuts in marginal tax rates. Allow this chart to demonstrate:
A growing band of economists, pundits and politicians seemed determined to talk the economy down until it records negative growth this year. As a sort of pre-emptive strike against the 2008 recession, Democrats have proposed various tax rebates (including rebates to folks who pay no federal income taxes). Not wanting to look uncaring, Republicans unfortunately have joined the tax rebate bandwagon ... just like they did in 2001.
For the past two weeks, the Wall Street Journal has done an amazing job destroying the canard that tax rebates spur economic growth. Today's lead editorial, "Re-Election Stimulus," does some damn fine canard-bustin', and then some :
"As for the economics, oh my. The most this temporary tax cut will do is goose consumer spending for a quarter or two this year. Since the IRS is saying it won't be able to cut the checks until midyear, any recession might well be over, if it even begins. The money to pay for these rebates has to come from somewhere, which means from other taxpayers or from bondholders who lend money to the Treasury. Either way, Congress and the White House are taking money from someone to pass out to someone else. The income effects are thus a wash, as the economists put it, while the substitution effects (higher taxes on the best income producers to finance consumption among the lowest) are negative."
Don't expect Washington lawmakers to pay attention to voices of reason like the Wall Street Journal's editorial page. Indeed, facts and logic are the first things tossed out of the window when elections are close at hand. You see, whenever times get tough, Washington pols have an all-consuming need to be seen as doing something. Even if the something actually accomplishes nothing.
# posted by Joltin' Django @ Friday, January 25, 2008 
