Monday, November 24, 2008

Irony....Coincidence....Or Some Useful Info?

Two items:

1. "President-elect Obama plans to name Christina Romer, an economics professor at the University of California at Berkeley, to chair his Council of Economic Advisers, aides said." [Politico]

2. "PERHAPS CONSERVATIVES SHOULD give John McCain more credit on economic policy. McCain voted against the Bush tax cuts, something that haunted him on his path to the Republican nomination. He defends himself by saying that tax cuts must be matched by spending restraint, but many conservatives believe that cutting taxes preemptively is the best way to restrain spending -- the "starve the beast" hypothesis. Now two economists find no support in the historical record to indicate that tax cuts have a negative effect on federal government spending. In fact, they found a positive effect -- the tax cuts were followed by spending increases. Unless politicians explicitly connect spending and tax policy, there is a tendency to disassociate the two. Meanwhile, contrary to the notion that tax cuts pay for themselves via extra growth, most of the subsequent recovery in lost revenue came as a result of tax increases enacted specifically to counter the initial tax cuts. Romer, Christina, and Romer, D., "Do Tax Cuts Starve the Beast: The Effect of Tax Changes on Government Spending," National Bureau of Economic Research (October 2007). [Kevin Lewis, Boston Globe, 3/23/08, ATSRTWT]

(Nod to KL)

1 comment:

br said...

Maybe I'm missing something, but I don't think you need statistics to figure out that the Gub doesn't make spending decisions based on its ability to pay.