Fear of tax increases are counter stimulative
Greg Mankiw shares Ray Fair’s (Yale) analysis of the stimulus bill:
So there is short run gain from the stimulus bill, mostly in 2010, but the potential long run costs do not seem trivial. If the stimulus bill is passed and the bailout continues, it may be that large tax increases will be needed starting in late 2011 or 2012.
Shouldn’t the prospect of large tax increases be factored negatively into the current “stimulative” effects?
I know I see them coming (and currency devaluation) and it is very un-stimulating.
In fact, fear of what they are doing, plus the general talking down of the economy Obama and his team are doing seems VERY counter-stimulative.
Summary:
Stimulative:
- $30 or $40 billion this year.
Counter Stimulative parts of the bill:
- Socialism
- Increased Unionism
- Increased Public Sector Employment
- Higher Taxes
- Trade War
- Devaluation of money
- Obama talking down economy so he can talk up this plan
- General feeling of “what the hell are they doing?”
February 11th, 2009 at 4:35 pm
Well, the political reality is that Obama ran on a campaign promise of doing something about the problem immediately. He could hardly adopt the Republican ideas since the voters clearly said they didn’t like the Republicans so much any more. And since the voters gave the Democrats the power, they expect a Democratic solution, not a replay of supply-side economics. For all its flaws, the voters must think it is at least better than doing nothing. They voted for hope and change and they are getting it. If you want what you think is a better deal, you will have to convince the voters to throw the rascals out and put your rascals in.
February 11th, 2009 at 5:29 pm
It isn’t some political game.
Either he is President and wants to do the right thing, or he is just some Chicago political hack moving corruption up to the highest level.
Right is right. Wrong is wrong. Economists think this plan is crazy. And indebting our future isn’t a game.
February 11th, 2009 at 5:32 pm
I hated Bush, but I figured he was generally trying to do what was right for all of us (in his view). I despised his stupidity.
Obama behaves like a child. I despise his immaturity. His inability to rise to the occasion, just when we need it.
BTW: He didn’t campaign on any of this crap.
February 11th, 2009 at 6:05 pm
“Economists think this plan is crazy” Some economists think so, while some think it is too little a dose of the needed medicine. Unfortunately, no one knows the “right” solution despite the firm assertions coming from all quarters. Obama’s task is to get something going by persuading Congress to appropriate money and create any needed legal structure.
BTW: Indebting our future has been around since Alexander Hamilton invented the brilliant concept of a national debt in Washington’s first administration. If you believed that deficit financing was OK to pay for the Iraq adventure, you have established the principle and the only question is which policy maneuvers deserve it and which should be paid for as they happen.
February 11th, 2009 at 6:25 pm
Hi Ken,
Long time lurker, first time poster, etc. Just have a quick question – is Carl related to you somehow? I’ve looked around your site but haven’t seen any mention. Anyway, sometimes the exchanges between you two are the best part of my day. Which is either a tremendous compliment to you both, or a really sad revelation about my daily life. I refuse to speculate further.
Regardless, thanks and keep up the good work.
February 11th, 2009 at 6:55 pm
Hello Prez of Burundi…
Carl is definitely related. We just don’t agree much on much.
I’d hoped he’d recovered from 8 years of Bush Derangement, but apparently it can be used to justify bad policy even for a non-Bush.
(-;
February 11th, 2009 at 7:01 pm
#4…. You actually think Obama thinks that is his task? You believe that? Sorry, that navite’ is surprising.
obama’s task is to get Democratic constituents repaid, screw Repubicans, have something on the books to claim “solved it” should this recession ever end.
You know I’ve never liked Republican spending anymore than Democratic spending. Less even, cause they should know better.
And no matter how you got there, you have to go forward with the right answer. “Bush did it too” is child like. See my “Not a Game” post for my thoughts on that view of it.
The “right” answer is to do nothing, or to cut spending and reduce long term taxes an equivalent amount. You may find an economist who thinks this plan is too small, but don’t ask him for too much advice. You will regret it.
February 11th, 2009 at 7:04 pm
You will note he rarely comments on the meat of my notes. Schooled in debate tactics by the best, he avoids my actual points to knock down ones he suggests and that can be knocked down.
Like “Bush did it”. Classic example. I never said I liked that Bush did it. And to be more precise, Bush didn’t do it alone. Bi-parstisan Congress, including many Democrats, approved that policy.
When he actually strikes meat on one my points, I’ll post a congratulatory note.