Razing Taxes

Speaking of (that is, writing of) blather, as Wild Bill was a few posts ago, we should perhaps consider all the blather in which the recent tax-cut spectacle was marinated.

To prepare rigorously for this post, I searched online via the question “Does cutting taxes create jobs?” I found many responses. After reading them, I can definitively say that the answer is yes, no, and maybe. Surprisingly the least helpful and one of the more turgid responses came from a blog on the Economist‘s site. To be fair, the blogger did clearly make the point that arguing against government stimuli because such stimuli is “moving money from one place to another” is less than impressive. That is, even the conservative (in an older sense of that term) Economist thinks stimulus is a good idea during a recession, especially in a deep one like ours. The blogger seemed to take this view one step further or one step to the side by suggesting that tax cuts were a source of stimulus.

From the Heritage Foundation part of the forest, I learned that cutting taxes, especially those that the wealthy might pay, stimulates the economy because it liberates disposable income and assures business people and rich people that the government will continue to be friendly (I am paraphrasing, of course, but I believe the paraphrase is fair).

The opposing argument to this one is that the income of rich people is already disposable and that, as one might guess, razing taxes on the rich adds to budgetary woe without stimulating the economy. This argument makes sense to me only because I observed the effects of Reaganomics. The economy turned around–eventually–but not because Reagan’s people cut taxes on the rich. The budget deficit ballooned, or dirigibled.

Where the Economist‘s blogger came through like a champ was in pointing out that all this “debate” is chiefly political show and not a real economical argument. That is, economists broadcasting from think-tanks are merely carrying political water, not thoughts, from those tanks.

I don’t know if governmental stimulation improves the economy overall, but it does create jobs. A vivid example one can see and even touch, if necessary, is a public works one. The government gives a state or local entity money for a highway, and people get to work designing and building that highway. Some percentage of those people are or would have been unemployed.

I believe but don’t know for sure that razing taxes on the rich has little or no effect on jobs-stimulus. Why would it? If the rich were going to spend that money in a way that created lots of jobs, they’d already be doing it, pre-tax. I know for sure that cutting taxes on anybody lowers the government’s income and therefore adds to the deficit woes.

Anyway, this layperson would, in fantasy land, go for a two-fer: raise taxes on the rich to Eisenhower-level and use a good portion of the money for jobs-stimulus or credit-stimulus (credit for buying houses, for running small business, etc.).

Even if it’s incorrect, my wee argument is practical in nature. The “debate” about tax-cuts we all heard and watched was not practical. It was blather, which, after drying, hardens so as to reinforce political postures.

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