Sunday, July 10, 2011

Bartlett Slams GOP Anti-Tax Dogma

Former Reagan Budget official Bruce Bartlett debunks Republican dogma that spending cuts will stimulate growth while revenue increases will slow it on Capital Gains and Games.

But the Republican position that spending cuts are expansionary while tax increases are depressing is not logically consistent. Both spending cuts and tax increases affect the economy in roughly the same way in the short run – by reducing aggregate demand. Fiscal contraction, whether on the tax side or the spending side, will have a negative effect under current economic conditions.

Economists have known for many years that many tax cuts are nothing more than spending by another name. They call such things “tax expenditures” and there are about $1 trillion worth in the tax code. Getting rid of many of them would have exactly the same economic benefits as reducing on-budget subsidies. Nevertheless, Republicans oppose eliminating tax expenditures unless other taxes are cut because any net tax increase would depress growth. The historical evidence, however, does not necessarily support this view.

--Ballard Burgher

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