So, I came up with a joke to try to illustrate the problem with the "cut taxes, raise deficit" view of policy.
Guy walks onto a used car lot. Guy has a sweater on that says, "I <3 Republicans".*
Salesman sees guy looking at 2006 Ford, marked "$10,000"
Salesman says, "Since you are a Republican, I'll cut the price to $4,000. You'll save $6,000, a 60% cut!"
Republican boy says, "Wow! That's great. Let's do the paperwork."
Salesman writes it up: "$4,000 now, and you owe $6,000, plus accumulated interest, sometime in the future when we feel like charging you."
Buyer starts screaming, "That's not what we agreed on! You said you were cutting the price 60%!"
Salesman says, "Yeah, but somebody has to pay for the car. Besides, I thought you Republicans couldn't tell the difference."
**********************
I said it wasn't funny. But why, when we "cut" taxes by X%, adding that amount to the deficit, do we feel like we are getting a benefit from the government, when if a used car company did the same thing we'd have a fit?
Angus put it really well in his post today: We are just moving money around by "cutting" taxes, it is not a tax cut at all. Yet...we are all really happy. The used car salesmen in Washington are right: We DON'T know the difference.
*(For you old people, "<3" is "heart"; look at it)
4 comments:
Maybe I'm retarded, but won't a taxpayer be indifferent to the tax cut now only if they personally are the one who pays the deficit later?
If so, is that true of how government deficit finance works? Say I'm a 50 year old physician. Will I personally ever pay for the deficit?
Am I wrong to conjecture that if taxpayers expect perpetual deficits - at least over their time personal time horizon - then tax "cuts" would have real effects on consumption today?
who would pay 10 dimes for a 2006 Ford??
Anonymous, you're right, in that people don't mind shitting all over their grandkids' future if they get some sweet benefits today, viz. he who dies with the most tax cuts wins. Doesn't make it moral or acceptable.
Is keeping the tax rates the same that they've been for nearly a decade a tax cut? Wouldn't changing them upward now be a tax increase?
I realize one can view it either way, and that increasing taxes might well help sustain the ongoing drunken spending binge that Congress enjoys. But where is the larger problem: not enough revenue, or too much spending?
If he's nearly a year of his employer's income in debt, maybe the guy shouldn't be buying a new car at all.
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