If Bigger Stimulus puts more Money into Consumers’ Pockets so will Bigger Tax Cuts

Posted by PITHOCRATES - November 19th, 2011

Week in Review

Economists are like climatologists.  They can look at a lot of data.  And come to all the wrong conclusions (see Whatever Happened to Discipline and Hard Work? by Tyler Cowen posted 11/12/2011 on The New York Times).

The second problem is that many conservatives have become so attached to their cultural vision that they have ceded sound, technocratic reasoning to the left and center. For instance there is a common willingness among conservatives to defend the Bush tax cuts, even though the evidence does not show much of an economic payoff.

Conservatives’ own culture, and the sheer desire to validate wealth, discipline and reward through law and the tax code, may have convinced them that the tax cuts have been beneficial. Measuring the actual effects of a tax cut isn’t always their main concern, even if they sometimes cite such numbers for rhetorical purposes. They feel in their bones that antagonism toward the rich is a dead end and so don’t favor highly progressive taxes.

That rhetorical line appeals to tax-weary voters, and seems part of a core conservative vision, but it is treading on dangerous ground because it moves away from testable theory: those tax cuts have already been in place for many years, yet it remains to be seen when or if they will spur the economy.

Interesting.  The Keynesians never talk this way.  When their stimulus spending hasn’t spurred the economy you know what they say?  The stimulus wasn’t big enough.  But when we’re wallowing in a recession that doesn’t want to end in large part due to the specter of Obamacare hanging over us like the sword of Damocles what does someone on ‘our’ side say?  Doesn’t look like the Bush tax cuts are working.  They don’t blame the rash of Obama policies that have squelched this economy.  No.  They go straight to the tax cuts.

Perhaps we should think like Keynesians.  And say the reason why the Bush tax cuts aren’t working is because they’re not big enough.  Make them bigger and those savings may offset the great new costs of Obamacare.  And they might just then turn this economy around.  Because if bigger stimulus puts more money into consumers’ pockets so will bigger tax cuts.



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