Countries That Cut Debt, Taxes and Spending Are Thriving

[mrjarrell]

Well, duh! Of course our politicians are too stupid to look at reality and apply it to our current fiscal situation. They're just blithely strolling along and heading for the cliff's edge, fully prepared to take us all along with them when they take the inevitable plunge.

Countries That Cut Debt, Taxes and Spending Are Thriving | Cato Institute

 

[Stschil]

I would estimate that nearly 98% of all 'Economists' that are advising the US Govt are 'spend our way out of debt' Keynsians or just plain incompetent.

Krugman is both.

 

[BogWalker]

Cutting spending is the way to save money? Surely you're joking! The only way to save money is to spend more of it! At least that's what the government has been telling me...

 

[elvinG]

Congress and the White House are fighting it out in an effort to keep away from the fiscal cliff. Democrats are stingy about making cuts to entitlements, and Republicans will not take into account higher taxes. But are Americans really taxed too seriously? A survey of the rates of other nations cast doubt. On the other hand, United States taxpayers, according to Global Finance, remain somewhere in the middle, paying a marginal rate of 35 percent annually.

 

[CathyInBlue]

But, but, but… Keynes tells us that when hard economic times hit, the central government has to tax more and spend more. How can this be?

 

[MisterChester]

So much hate for Keynes here. As someone with a degree in economics I have to shake my head at these oversimplified points people make about Keynesian Economics. Largely because every school of economic theory is wrong on some level because of what economics is. It cannot be perfect by the definition of economics. Does anyone else have a better school of thought? It would be just as wrong/bad as Keynes (unless you hate a free market, if so then there's the door). I'm not saying I am totally on the Keynes boat, but it does have a lot of good points that help form the backbone of free market economics. The "tax and spend" is one solution of many that works in particular situations, and this is not one of them.

 

[Manatee]

So much hate for Keynes here. As someone with a degree in economics I have to shake my head at these oversimplified points people make about Keynesian Economics. Largely because every school of economic theory is wrong on some level because of what economics is. It cannot be perfect by the definition of economics. Does anyone else have a better school of thought? It would be just as wrong/bad as Keynes (unless you hate a free market, if so then there's the door). I'm not saying I am totally on the Keynes boat, but it does have a lot of good points that help form the backbone of free market economics. The "tax and spend" is one solution of many that works in particular situations, and this is not one of them.

I sympathise. I have found that posters on firearms websites have a very high regard for their own opinions on economics. Funny....I don't remember the last time I saw an opinion on Glock vs Sig vs H&K on an economics blog.

 

[Hohn]

Please, misterchester-- do cite the examples of where tax and spend have been the solution.

I happen to fall pretty close to the Austrian school myself.

 

[pudly]

Unfortunately, macro-economics is riddled with political influence. Keynes has been cited as a reason to spend more, no matter the circumstances (not Keynes' view). This fits in fine with with many politicians natural desire for power and influence.

Hayek's free market views offer much less opportunity for graft and corruption, so it is hard to get a power-hungry government to follow this course.

 

[mrjarrell]

I'll stick with the Austrians.

 

[MisterChester]

Please, misterchester-- do cite the examples of where tax and spend have been the solution.

I happen to fall pretty close to the Austrian school myself.

I can't name a specific example off the top of my head, so I'll provide a circumstance. A country with a free market hits a cyclical recession. Recessions are bound to happen at some point in any major economy. Suppose this country has no debt or some that is definitely easy to pay off. It hits its recession for whatever reason. The government can spend money to stimulate the economy by means of infrastructure or something like that. It doesn't necessarily have to raise taxes but that is an option. The whole idea with that process is that it is done responsibly, as in when the cyclical recession becomes growth that is when you reduce your spending and taxes to pre-recession levels. Taking on debt isn't always a bad thing, as long as it is handled responsibly. The debt incurred during the recession should be able to be paid off from the growth. Thing is, it won't work in the American economy because for one they aren't responsible and two raising taxes is still a bad idea at this point.

 

[pudly]

Unfortunately, the "responsible" politicians are nearly mythical. Politics attracts the power-hungry. You will find public-minded people sometimes, but far too few. This seems to be consistent across time and cultures. That is why constraining the size and influence of government is critical. Unfortunately, we are way beyond that.

 

[MisterChester]

Responsible politicians are the great white elk of today.

 

[spearheadersarge]

The problem is the debt never gets paid off. Every time the US has had a surplus, it gets funneled right out the door. Just look at Social Security. That system had rang up so much cash the pile was irresistible to everyone from both parties. Now we have borrowed so much of the money that should have been earning interest that there will have to be a reduction in benefits, an age increase to qualify, and means testing just to keep as much as they can. Why is it that those most likely to receive the benefits have their whole wage taxed and the rich do not? The US has never been able to control its spending. You don't get votes that way! State governments are in the same boat due to public sector unions negotiating fat retirements when things were good, but now that things are bad, those 10% return estimates are biting people in the ass! You can't pay people when you are only get .25% when you thought it would be 10!

 

[MisterChester]

I like pointing out how in recent history in the US, they have at multiple times handed out checks, most recent being under Dubya. I never understood it, it makes no economic sense. They somehow didn't think to pay off the debt with that money. They must have also thought that all the bridges and roads were in perfect condition, the schools were at the top of the world, all the hospitals were perfectly taken care of, etc. Handing out money doesn't work!

 

[AtTheMurph]

Well, duh! Of course our politicians are too stupid to look at reality and apply it to our current fiscal situation. They're just blithely strolling along and heading for the cliff's edge, fully prepared to take us all along with them when they take the inevitable plunge.

Countries That Cut Debt, Taxes and Spending Are Thriving | Cato Institute

By believing that they are stupid you are an enabler and part of the problem.

They know exactly what they are doing. They are enslaving us.

“Debt is the slavery of the free.”

-Publilius Syrus​

 

[churchmouse]

Unfortunately, the "responsible" politicians are nearly mythical. Politics attracts the power-hungry. You will find public-minded people sometimes, but far too few. This seems to be consistent across time and cultures. That is why constraining the size and influence of government is critical. Unfortunately, we are way beyond that.

Exactly. The depth of the issue is beyond repairing in our lifetimes.

Our elected officials are more akin to a CEO that is stripping off the wealth from a company to sell the bones off to the highest bidder. No concern for anything beyond person wealth/power.

 

[mrjarrell]

Exactly. The depth of the issue is beyond repairing in our lifetimes.

Our elected officials are more akin to a CEO that is stripping off the wealth from a company to sell the bones off to the highest bidder. No concern for anything beyond person wealth/power.

Now, what presidential candidate does that sound like?

 

[churchmouse]

Now, what presidential candidate does that sound like?

I see what you did there.........

That is a weak winky face.

 

[Hohn]

I can't name a specific example off the top of my head, so I'll provide a circumstance. A country with a free market hits a cyclical recession. Recessions are bound to happen at some point in any major economy. Suppose this country has no debt or some that is definitely easy to pay off. It hits its recession for whatever reason. The government can spend money to stimulate the economy by means of infrastructure or something like that. It doesn't necessarily have to raise taxes but that is an option. The whole idea with that process is that it is done responsibly, as in when the cyclical recession becomes growth that is when you reduce your spending and taxes to pre-recession levels. Taking on debt isn't always a bad thing, as long as it is handled responsibly. The debt incurred during the recession should be able to be paid off from the growth. Thing is, it won't work in the American economy because for one they aren't responsible and two raising taxes is still a bad idea at this point.

So tax-and-spend works when you create an artificial construct designed to be the rare condition where it works?

Well I can make Bose-Einstein condensate, too-- given the right conditions.


Gov't spending is not the only way to enact a stimulus. Monetary stimulus can be done and is almost without exception far more effective because it preserves the free-market allocation that disappears with politicians steering money to pet projects favored by lobbyists.

There are times when stimulus may help. But it's NOT the case that tax-and-spend is required to do so, nor would that constitute a valdation of Keynesianism.

Anyone who still takes Keynes seriously after the stagflation of the 1970s (which, according to Keynesian orthodoxy could NOT happen!), needs to either be a slimy weasel like Krugman or just a moron like John Kenneth Galbraith.

JMO