FT92: “If government spending stimulates economic activity and tax cuts are government spending then tax cuts stimulate economic activity.” -Old Pithy

Posted by PITHOCRATES - November 18th, 2011

Fundamental Truth

The Keynesian School says when in Recession the Government should step in and Spend Money

Politicians lie.  Because they can’t do the things they want to do if they tell the truth.  And what do they want to do?  Accumulate money.  Our money.  To tax.  And spend.  To reward friends and cronies.  To make people dependent on government benefits.  To buy votes.  To secure their power.  And to live very comfortably on the taxpayer’s dime.

This comes at a cost.  The U.S. has accumulated a debt greater than most countries’ GDP.  And the deficit has surpassed the trillion dollar mark.  This irresponsible spending has caused Standard and Poor’s to downgrade the U.S. sovereign debt rating for the first time in U.S. history.  And the loose monetary policy to help put people into houses they couldn’t afford (to buy more votes) created the mother of all housing bubbles.  Leading to the Subprime Mortgage Crisis.  And the worst recession since the Great Depression.  The Great Recession.  That lingers on despite officially ending in 2009.  Economists no doubt fudged the numbers so they could call the Obama stimulus a success.  Which they did in the premature Recovery Summer.

Obama’s economic policies are Keynesian economic policies.  And the Keynesian school says when the economy goes into recession the government should step in and spend money.  To replace the economic activity that isn’t happening in the private sector.  This is supposed to prime the economic pump.  And restore the economy to good times.  But it doesn’t work.  It never has.  And it never will.  So why are they so insistent on Keynesian economic policies?  Because they empower the government to tax.  And spend.  And that’s what government wants to do.  Tax and spend.

If Keynesian Stimulus Spending Stimulates Economic Activity then so must Tax Cuts

Of course, this spending runs up massive deficits.  And debt.  As noted above.  And what do they want to do?  Well, they want to do the responsible thing.  And live within our means.  By cutting spending?  No.  By raising taxes.  To pay for this orgy of spending.  Because cutting spending would be irresponsible.  And hurt the economy.

Cutting taxes gives people more money to spend.  Which is good.  Because that is what stimulus spending does.  Gives people more money to spend.  But they oppose tax cuts.  Because the money doesn’t pass through their sticky fingers.  So they attack tax cuts.  Play with the meaning of words.  They call ‘tax cuts’ government spending.  Because spending reduces the amount of money in the national treasury.  Just like tax cuts.  Ergo tax cuts equal government spending.  And the only way to pay for government spending is, wait for it, with taxes.  That’s right.  The only responsible way to pay for tax cuts is with more taxes.  Circular logic of the first order.  But they use it.  And get away with it.

I say fine.  Let’s give them this perversion of the English language.  Tax cuts are government spending.  Just like Keynesian stimulus spending is government spending.  And if Keynesian stimulus spending stimulates economic activity then so must tax cuts.  Because they’re the same thing.  According to them.

100% of Tax-Cut Stimulus Stimulates Economic Activity

If spending and tax cuts are both spending then they’re both stimulative.  Given the choice I say choose tax cuts.  At least the bureaucrats won’t create the resulting debt by buying votes.  The private sector will.  As it generates more economic activity.  Which will create new jobs.  And new taxpayers.  Ultimately resulting in new tax revenue for the government.

Which is something Keynesian stimulus spending just won’t do.  For 100% of tax-cut stimulus stimulates economic activity.  And not a dime of it passes through a politician’s hand to a friend or crony to buy a single vote.

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