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The Zombie Lie: Raising Taxes Impedes Growth

By Big Tent Democrat, Section Other Politics
Posted on Fri Dec 17, 2010 at 10:03:47 AM EST
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Krugman:

[S]upply-side economics should have been killed by the Clinton years: he raised taxes on the rich, everyone on the right predicted catastrophe, and what followed was 8 years of rapid growth and surging revenues, with the budget actually moving into surplus for the first time in three decades. But no: the right interpreted all the good stuff as a lagged effect of the 1981 tax cut[.]

The "most progressive Administration in a generation" and its Beltway supporters are now the leading purveyors of this Zombie Lie.

< Part 2 of The Deal | When "Tax Enthusiasts" Endorse The Bush/Obama Tax Cuts >

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    The Zombie Lie: Raising Taxes Impedes Growth | 48 comments (48 topical)

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    Is Keynes dead? (5.00 / 1) (#5)
    by diogenes on Fri Dec 17, 2010 at 11:47:53 AM EST
    I thought liberals believed in Keynesian economics.  I guess I was naive.

    Perhaps (5.00 / 2) (#12)
    by Big Tent Democrat on Fri Dec 17, 2010 at 01:51:32 PM EST
    an understanding of Keynesian economics would help you on this point.

    Parent
    Keynes, from Wikipedia (none / 0) (#26)
    by diogenes on Fri Dec 17, 2010 at 09:42:17 PM EST
    "Keynes′ theory suggested that active government policy could be effective in managing the economy. Rather than seeing unbalanced government budgets as wrong, Keynes advocated what has been called countercyclical fiscal policies, that is policies which acted against the tide of the business cycle: deficit spending when a nation's economy suffers from recession  or when recovery is long-delayed and unemployment is persistently high--and the suppression of inflation in boom times by either increasing taxes or cutting back on government outlays. He argued that governments should solve problems in the short run rather than waiting for market forces to do it in the long run, because "in the long run, we are all dead."[14]

    It looks like Keynes would favor deficit spending in recession.  I guess if we raise taxes by a trillion and had a two trillion dollar stimulus, that would be Keynesian.  Is that what is advocated?

    Parent

    Keynes would tell you that those (5.00 / 2) (#28)
    by Militarytracy on Fri Dec 17, 2010 at 10:06:28 PM EST
    experiencing a windfall need a significant tax increase right now, and that the government needs to maintain deficit spending with an eye to putting that deficit spent money into the biggest multipliers.....trickle down ReaganObamanomics is the crappiest multiplier.

    Parent
    If the tax cuts would not lead to spending cuts (5.00 / 1) (#34)
    by Big Tent Democrat on Sat Dec 18, 2010 at 11:09:05 AM EST
    Then the Bush/Obama tax cuts would not be a problem.

    But they will and they are.

    Parent

    The point of deficit spending (none / 0) (#30)
    by jpe on Sat Dec 18, 2010 at 06:36:09 AM EST
    is to pull growth from the future into the present.  If you raise taxes to finance stimulus spending, you just shuffle money around between current taxpayers.  

    Perhaps an understanding Keynesian economics would help you on this point.

    Parent

    Nope (5.00 / 1) (#33)
    by Big Tent Democrat on Sat Dec 18, 2010 at 11:07:54 AM EST
    The point of Keynsian economics in terms of tax cuts vs government spending is precisely that the pri9vate sector is NOT spending and therefore the government must provide the demand.

    Tax cuts are not the answer under Keynesian economics. Increased government spending is.

    The idea that Keynes was a proponent of tax cuts over government spending is so ridiculous it does not even merit a response.

    Supply siders hate Keynes precisely because he did not advocate for tax cuts as a stimulus. He advocated for government spending.

    Parent

    Utter nonsense (none / 0) (#36)
    by Warren Terrer on Sat Dec 18, 2010 at 12:52:06 PM EST
    You have no understanding of Keynesian economics whatsoever.

    Parent
    Hoover Zombies! (none / 0) (#1)
    by Militarytracy on Fri Dec 17, 2010 at 10:11:44 AM EST
    Per wiki on the Hoover Tax Cuts

    Prior to the start of the Great Depression, Hoover's first Treasury Secretary, Andrew Mellon, proposed and saw enacted, numerous tax cuts, which cut the top income tax rate from 73% to 24% (under Presidents Warren G. Harding and Calvin Coolidge). When combined with the sharp decline in incomes during the early depression, the result was a serious deficit in the federal budget.
    Let me give you the flip on the (none / 0) (#2)
    by jimakaPPJ on Fri Dec 17, 2010 at 10:52:45 AM EST
    Obama supporter's argument that his stimulus package worked because it saved millions of jobs..

    If Clinton had not raised taxes the economy would have boomed even more and the collapse in March of 2000 would not have happened.

    Heh (5.00 / 1) (#3)
    by Big Tent Democrat on Fri Dec 17, 2010 at 10:56:53 AM EST
    "The Collapse of March of 2000."

    Parent
    BTD, don't you remember (none / 0) (#4)
    by Harry Saxon on Fri Dec 17, 2010 at 11:22:19 AM EST
    that Bush specifically cited the collapse of the dot-com bubble as one of the major reasons for his tax cuts in 2001?

    Parent
    No, (none / 0) (#7)
    by jimakaPPJ on Fri Dec 17, 2010 at 12:19:02 PM EST
    DA, I don't remember.

    Parent
    Conservatives are some of the most (5.00 / 1) (#8)
    by Ga6thDem on Fri Dec 17, 2010 at 01:18:36 PM EST
    gullible people I have ever seen. I've always wondered how these scam artists took so much money from people but after having political discussions with conservatives I no longer wonder.

    Parent
    heh (none / 0) (#11)
    by jimakaPPJ on Fri Dec 17, 2010 at 01:49:34 PM EST
    Next thing you will be telling me is that conservatives elected Obama.

    Parent
    Nope (5.00 / 3) (#13)
    by Ga6thDem on Fri Dec 17, 2010 at 02:18:30 PM EST
    there plenty of naive people on the left too. I just find more conservatives that believe in economic myths than anyone else.

    I knew that Obama was a supply sider from the get go. All of his advisers are from the Milton Friedman University of Chicago school of economics. All you have to do is actually look. In fact those on the left reminded me constantly of the Bushbots and I said so repeatedly.

    Parent

    I don't know how we got here (none / 0) (#20)
    by jimakaPPJ on Fri Dec 17, 2010 at 05:13:19 PM EST
    My point was that both sides make claims that can't be proven except in their minds.

    Parent
    So (none / 0) (#23)
    by Ga6thDem on Fri Dec 17, 2010 at 06:02:16 PM EST
    your theory is that it doesn't matter if Obama raises taxes or cuts taxes, it will have no effect on the economy whatsoever?

    Parent
    My theory is that (none / 0) (#24)
    by jimakaPPJ on Fri Dec 17, 2010 at 09:05:51 PM EST
    both sides will always find reasons to say that the other is wrong.

    And neither will be able to prove their claim.

    No one can prove that the stimulus actually saved jobs.

    No one can prove that Clinton increasing taxes caused an economic boom.

    For the former the only thing I see is government getting fatter which led to the private side getting skinner.

    For the latter I remember cheap energy and a huge jump in technology.

    Parent

    Except for the CBO analysis: (5.00 / 1) (#25)
    by Harry Saxon on Fri Dec 17, 2010 at 09:11:05 PM EST
    No one can prove that the stimulus actually saved jobs.

    From ABC News (dot)com:

    The Congressional Budget Office has weighed in on the effects of the government's stimulus spending this past summer and concludes that the Recovery Act raised the GDP, lowered unemployment, and increased the number of people with jobs, but the range of numbers is very, very broad. The CBO also suggests the major effects of the stimulus peaked during what the administration once called the Summer of Recovery, are diminishing, and will "wane gradually" during these final months of 2010.

    Click Me

    Parent

    If jobs were saved (none / 0) (#32)
    by jimakaPPJ on Sat Dec 18, 2010 at 10:41:39 AM EST
    why did the unemployment numbers increase??

    The facts are that SOME jobs were saved, mostly in the government sector and some were created, mostly in the government sector (what was that in LA? $1M per job created?.....

    but the NET was an INCREASE in the unemployment

    So the stimulus did not save "jobs."

    Parent

    Re:Question (none / 0) (#38)
    by Harry Saxon on Sat Dec 18, 2010 at 10:27:23 PM EST

    If jobs were saved (none / 0) (#32)
    by jimakaPPJ on Sat Dec 18, 2010 at 10:41:39 AM EST
    why did the unemployment numbers increase??

    What part of "lowered unemployment" is difficult to understand?

    The facts are that SOME jobs were saved, mostly in the government sector and some were created, mostly in the government sector (what was that in LA? $1M per job created?.....

    If you'd rather than engage in unsubstantiated handwaving instead of looking at the facts in the CBO report, then you're perhaps not interested in serious discussion about the issue but blame-laying.

    Just a suggestion.

    Parent

    I am interested (none / 0) (#39)
    by jimakaPPJ on Sun Dec 19, 2010 at 12:09:44 PM EST
    in understanding that if unemployment numbers go up then the number of jobs have gone down.

    Your argument is like:

    If we had some ham we would have some ham and eggs if we had some eggs.

    The promise was that unemployment would not exceed 8%.

    We all know how that has worked out.

    Parent

    Please quit trying to twist things (none / 0) (#40)
    by Harry Saxon on Sun Dec 19, 2010 at 01:11:42 PM EST
    arent

        I am interested (none / 0) (#39)
        by jimakaPPJ on Sun Dec 19, 2010 at 12:09:44 PM EST
        in understanding that if unemployment numbers go up then the number of jobs have gone down.

    Unemployment is based on the number of people seeking jobs, which your simplistic understanding doesn't take into account.

    Your argument is like:

    If we had some ham we would have some ham and eggs if we had some eggs.

    The promise was that unemployment would not exceed 8%.

    Yes that was, and adults usually can understand when promises can't be kept, if they have a maturity level above that of a sixth-grader.

    We all know how that has worked out.

    Cliche city again, PPJ?

    Parent

    Harry, I'm giving jim the benefit of the doubt (none / 0) (#41)
    by jeffinalabama on Sun Dec 19, 2010 at 01:21:02 PM EST
    here. He's claimed he's liberal on most social issues. He might be pointing out that the stimulus was not targetted correctly, or that it was too small, or both.

    For all I know, Jim wanted a big spending stimulus that would have created more jobs. As it is, the stimulus slowed job loss by creating/maintaining jobs, but it wasn't a big success. The rate of job loss outstripped the rate of job creation/ maintenance, without a doubt.

    Parent

    PPJ (none / 0) (#42)
    by Harry Saxon on Sun Dec 19, 2010 at 01:47:38 PM EST
    has been long and vociferous in his anathemas against Obama, and I think of PPJ's self-description like the story about Abraham Lincoln:

    In discussing the question, he used to liken the case to that of the boy who, when asked how many legs his calf would have if he called its tail a leg, replied, " Five," to which the prompt response was made that calling the tail a leg would not make it a leg.


    Parent
    Well, I do try to (none / 0) (#43)
    by jeffinalabama on Sun Dec 19, 2010 at 02:29:48 PM EST
    think the best about folks.

    Parent
    It is not necessary to kowtow to (none / 0) (#45)
    by jimakaPPJ on Sun Dec 19, 2010 at 07:09:58 PM EST
    Obama to be a Social Liberal...

    In fact, based on Obamacare, it would be mistake to do so.

    In fact he told Sweetie, and us, all about himself

    Parent

    Like we didn't know what your (none / 0) (#47)
    by Harry Saxon on Sun Dec 19, 2010 at 07:37:00 PM EST
    opinion of Obamie was already, but thanks for demonstrating the maturity of a 7th grader who believes:

    There are no moderate Democrats.

    A few are less radical than the others.




    Parent
    heh (none / 0) (#44)
    by jimakaPPJ on Sun Dec 19, 2010 at 07:05:12 PM EST
    Here's a nice article on the subject and I don't have to quote a 1000 words of it or refer to a pulp detective story writer.

    Parent
    Sorry you confuse 100 with 1000 words (none / 0) (#46)
    by Harry Saxon on Sun Dec 19, 2010 at 07:25:49 PM EST
    and of course it's just a coincidence that a "Social Liberal" just happens to quote from one of the premier conservative think tanks in the USA.

    BTW, Nero Wolfe stories were run in the slicks, not the pulps, thanks for demonstrating the same discernment that you bring to political situations.

    Parent

    I hate to break it to you (5.00 / 0) (#14)
    by Harry Saxon on Fri Dec 17, 2010 at 02:25:03 PM EST
    but I was being sarcastic, which is why you don't remember it.

    Parent
    Starting in March 2000 (none / 0) (#6)
    by jimakaPPJ on Fri Dec 17, 2010 at 12:17:13 PM EST
    the NASDAQ ran off 50% in the next 12 months.

    Parent
    Yes (5.00 / 1) (#9)
    by Ga6thDem on Fri Dec 17, 2010 at 01:19:26 PM EST
    and it was greed that destroyed them just like greed destroyed the bankers. The only difference is that Clinton didn't bail them out.

    Parent
    My point was (none / 0) (#10)
    by jimakaPPJ on Fri Dec 17, 2010 at 01:47:57 PM EST
    that in both cases the claims can't be proved.

    Parent
    Buwhahahahaha (none / 0) (#15)
    by Militarytracy on Fri Dec 17, 2010 at 03:14:45 PM EST
    Now Clinton is responsible for the bad economy in 2000.  He left the whole country flush with funds and a surplus in the bank....and it's all his fault.  Priceless.....absolutely priceless!

    Parent
    Government surpluses (none / 0) (#16)
    by Warren Terrer on Fri Dec 17, 2010 at 03:23:20 PM EST
    are actually bad for the economy as they withdraw money from the economy. I won't go so far as to say that the Clinton surplus caused the recession of 2000, but it might have been a factor, and it certainly provided no benefit.

    This is why we liberals supposedly support government spending as stimulus, except when we suddenly don't support it because Obama is against it.

    Parent

    Oh, now surpluses may have been (5.00 / 1) (#17)
    by Militarytracy on Fri Dec 17, 2010 at 03:30:44 PM EST
    complicit when it comes to setting us all on the road to hell.

    Parent
    Yes (none / 0) (#18)
    by Warren Terrer on Fri Dec 17, 2010 at 03:37:20 PM EST
    surpluses are bad for the economy. Even Republicans know this, which is why they never run surpluses and only push for them when Democrats are in the Whitehouse.

    Parent
    Oy (5.00 / 1) (#19)
    by Militarytracy on Fri Dec 17, 2010 at 03:40:12 PM EST


    Parent
    IIRC, MT, there was a small recession (none / 0) (#21)
    by jeffinalabama on Fri Dec 17, 2010 at 05:24:09 PM EST
    in the eisenhower kennedy years b/c of surpluses, which led to Kennedy's tax code changes.

     However, in 2010, a surplus could pay down the debt. Fund education. do a lot.

    IOW, I think that once there was a recession related to money supply, but the US was on the gold standard, so it was a finite chunk of money. Not the case now. A surplus could draw money out, if the banksters would allow it, pay down debt, or do whatever.

    All of this depends on my memory, but at one time I had a good one... didn't Nixon take us off the 'god standard,' something begun by Roosevelt?


    Parent

    *gold Standard (none / 0) (#22)
    by jeffinalabama on Fri Dec 17, 2010 at 05:24:57 PM EST
    in last sentence, not god standard...

    Parent
    Yeah, we went off the Gold standard (none / 0) (#27)
    by Militarytracy on Fri Dec 17, 2010 at 10:02:17 PM EST
    in the early 70's.  Understand though, I was in kindergarten and have never seriously entertained a gold standard economy since I've been old enough to entertain such notions :)  I know there was such a thing, but think it very unlikely in my lifetime that I will see one.

    Parent
    Oh, what exists beats the gold standard all to (5.00 / 1) (#48)
    by jeffinalabama on Mon Dec 20, 2010 at 12:15:15 AM EST
    blazes. But Kennedy did lower some tax rates when there was a much more finite money supply because of surpluses.

    W did the same thing, but with different results. It's like the article Jim referenced, the second one. Basing analysis of the 2008-9 stimulus to pre- 1979 actually represents that the stimulus then, just like the stimulus under the current administration were a) too small, and b) targeted the wrong areas. The power of federal spending is in the power of the government to spend where needed. Giving block grants allowed statew and local governments to pay employees. It didn't increase employment, but it staved off unemployment.

    It wasn't audacity, but timidity.

    Now a quote from the Hoover Institute and the WSJ-- not the best sources for straighforward analysis!

    Parent

    Positive net assets would (5.00 / 1) (#31)
    by jpe on Sat Dec 18, 2010 at 06:38:26 AM EST
    pull money out, but a surplus - current revenue over current expense - doesn't.  It repays debt holders.  When debt is large, it can hamper economic performance and a surplus is necessary to bring debt back to optimal levels.

    Hence the Clinton boom.

    Parent

    There's no need (none / 0) (#35)
    by Warren Terrer on Sat Dec 18, 2010 at 12:50:49 PM EST
    to pay down federal government debt in a fiat currency system. This is one of the biggest myths, i.e. that the government needs to borrow to fund its spending and hence that it needs to pay back this borrowing somehow.

    Paying down said debt is the same thing as reducing government spending, which is always recessionary. Liberals do themselves no favors when they argue that massive government spending is necessary to get the economy out of recession while at the same time surpluses cause economic booms. It can't be both. If you think surpluses are good for the economy then you should be a big supporter of government austerity right now.

    Please explain to me how exactly the Clinton surpluses caused the booming economy of the 1990s?

    Parent

    I would also add (none / 0) (#37)
    by Warren Terrer on Sat Dec 18, 2010 at 12:57:15 PM EST
    that government surpluses are a net drain on savings in the public sector when a country such as the USA has a trade deficit. What the Clinton surpluses did was helped drive the savings rate of the public sector into negative territory, i.e. caused massive private sector debt.

    Parent
    Romer & Romer are zombie trolls? (none / 0) (#29)
    by jpe on Sat Dec 18, 2010 at 06:34:18 AM EST
    They showed in their paper from a year or two back that tax hikes generally slow growth.  There are a few exceptions (such as tax hikes to reduce inherited debt, in which the case the markets anticipate better economic conditions), but that's what the paper purported to prove.

    The Zombie Lie: Raising Taxes Impedes Growth | 48 comments (48 topical)

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