Are these true?
http://www.youtube.com/watch?v=mM5Ep9fS7Z0&sns=Facebook
The 7 biggest econmomic lies!
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_Bob Loblaw
- _Emeritus
- Posts: 3323
- Joined: Wed Jun 27, 2012 2:26 am
Re: The 7 biggest econmomic lies!
The short answer is that every one of these "lies" is a lot more complicated than Reich (or conservatives) says it is.
Do tax cuts help grow the economy? Looking strictly at rates of taxation and GDP growth, the answer is no. But the problem is that there are a lot of factors involved. Take, for example, the "payroll tax vacation" that was passed in 2009. Did that tax cut translate into strong economic growth. Obviously not, but then we were in the midst of a deep global recession, so it's entirely possible that without the tax cut, things would have been worse--but that would require more complex analysis than Robert Reich drawing pictures. Similarly, the Bush tax cuts came when the tech bubble burst. Who knows what would have happened if tax rates had remained the same?
Badly done tax cuts can severely distort the economy, just as poorly designed government spending can. Take, for instance, the GM bailout, which we are told prevented the company from going bankrupt--ironically by putting it through bankruptcy proceedings. Did the bailout "save jobs"? It's hard to say, as normal bankruptcy would have motivated GM to operate more efficiently, so they might have laid off workers in the short term, but a more efficient company is more viable in the long term. What happened instead is that GM shareholders (you know, those greedy investors such as pension funds) got screwed. Meanwhile, having our government guarantee GM's short-term viability took away any incentive to change business practices, adjust union contracts, and make other changes to improve long-term health for the company. And why wouldn't they? If they know that the government will bail them out every time, they don't have to worry about bad products affecting them. Look at Chrysler, which has been bailed out at the rate of about every ten years by the government. Does anyone believe that the maker of the Chrysler Sebring (which was judged the worst passenger car in the US) made any fundamental changes? Same goes for the financial bailout.
So, it's a mixed bag on either account. The ideas that tax cuts automatically promote growth and that more spending promotes growth are both Keynesian theories, and there's no simple answer as to whether either is true.
Do tax cuts help grow the economy? Looking strictly at rates of taxation and GDP growth, the answer is no. But the problem is that there are a lot of factors involved. Take, for example, the "payroll tax vacation" that was passed in 2009. Did that tax cut translate into strong economic growth. Obviously not, but then we were in the midst of a deep global recession, so it's entirely possible that without the tax cut, things would have been worse--but that would require more complex analysis than Robert Reich drawing pictures. Similarly, the Bush tax cuts came when the tech bubble burst. Who knows what would have happened if tax rates had remained the same?
Badly done tax cuts can severely distort the economy, just as poorly designed government spending can. Take, for instance, the GM bailout, which we are told prevented the company from going bankrupt--ironically by putting it through bankruptcy proceedings. Did the bailout "save jobs"? It's hard to say, as normal bankruptcy would have motivated GM to operate more efficiently, so they might have laid off workers in the short term, but a more efficient company is more viable in the long term. What happened instead is that GM shareholders (you know, those greedy investors such as pension funds) got screwed. Meanwhile, having our government guarantee GM's short-term viability took away any incentive to change business practices, adjust union contracts, and make other changes to improve long-term health for the company. And why wouldn't they? If they know that the government will bail them out every time, they don't have to worry about bad products affecting them. Look at Chrysler, which has been bailed out at the rate of about every ten years by the government. Does anyone believe that the maker of the Chrysler Sebring (which was judged the worst passenger car in the US) made any fundamental changes? Same goes for the financial bailout.
So, it's a mixed bag on either account. The ideas that tax cuts automatically promote growth and that more spending promotes growth are both Keynesian theories, and there's no simple answer as to whether either is true.
"It doesn't seem fair, does it Norm--that I should have so much knowledge when there are people in the world that have to go to bed stupid every night." -- Clifford C. Clavin, USPS
"¡No contaban con mi astucia!" -- El Chapulin Colorado
"¡No contaban con mi astucia!" -- El Chapulin Colorado