Economics Questions

Re: Tax-cuts and budget deficits

Spideynw — Wed, 08 Jul 2009 15:19:38 GMT

Spideynw:
Morally speaking, taxation is worse, because it is taken without consent. However, economically speaking, borrowing is just as bad as taxation, because the money is still wasted, and in both cases the money is now not available for the private sector.

I guess I should correct this. Borrowing results in later taxation, as such, in both cases money is going to be taken from people without their consent.

Re: Tax-cuts and budget deficits

Individualist — Tue, 07 Jul 2009 22:21:26 GMT

Spideynw:

Individualist:
I mean, will the tax-cuts boost the productivity of the economy so that the borrowed money (or whatever) can be paid back?

Again, no, because spending has not been cut. If the government cuts taxes, but does not cut spending, then the government will probably just increase borrowing. Morally speaking, taxation is worse, because it is taken without consent. However, economically speaking, borrowing is just as bad as taxation, because the money is still wasted, and in both cases the money is now not available for the private sector.

Mathematically speaking, if the government reduces taxes by 1%, but increases borrowing to make up for it by 1%, or increases the printing of money by 1%, what has really changed? How can the private sector be more productive, when there is still not more money for the private sector?

Very good point.

Re: Tax-cuts and budget deficits

Spideynw — Sun, 05 Jul 2009 18:20:14 GMT

Individualist:
I mean, will the tax-cuts boost the productivity of the economy so that the borrowed money (or whatever) can be paid back?

Again, no, because spending has not been cut. If the government cuts taxes, but does not cut spending, then the government will probably just increase borrowing. Morally speaking, taxation is worse, because it is taken without consent. However, economically speaking, borrowing is just as bad as taxation, because the money is still wasted, and in both cases the money is now not available for the private sector.

Mathematically speaking, if the government reduces taxes by 1%, but increases borrowing to make up for it by 1%, or increases the printing of money by 1%, what has really changed? How can the private sector be more productive, when there is still not more money for the private sector?

Re: Tax-cuts and budget deficits

Individualist — Fri, 03 Jul 2009 22:30:08 GMT

Spideynw:

Individualist:

Do tax-cuts compensate for budget deficits to any degree?

No. If spending is not reduced, then the government has to borrow more money. In other words, nothing has been reduced.

I mean, will the tax-cuts boost the productivity of the economy so that the borrowed money (or whatever) can be paid back?

Re: Tax-cuts and budget deficits

Spideynw — Wed, 01 Jul 2009 14:29:47 GMT

Individualist:

Do tax-cuts compensate for budget deficits to any degree?

No. If spending is not reduced, then the government has to borrow more money. In other words, nothing has been reduced.

Re: Tax-cuts and budget deficits

hayekianxyz — Wed, 01 Jul 2009 13:08:34 GMT

Individualist:

Do tax-cuts compensate for budget deficits to any degree?

Peter Klein made an interesting blog post on a related subject over at O&M, essentially his point was that during booms governments think that in order to stop inflation they need to raise taxes, and that during a bust the government needs to stop unemployment and as such start spending big time and running huge defecits. In either stage of the cycle, the government expands.

Now, as for your question, Roger Garrison covers the notion of Ricardian Equivelance and comes down on the other side of Mises. Mises claimed that it doesn't matter how government obtains finance, in the end all things are the same. I forget the specifics of Roger Garrison's argument (I'm giving Time and Money again for the second time now, so I'll get back to you once I'm on the relevant section). I think the answer is no, I'd argue that budget deficits are the most pernicious form of government finance.

Re: Tax-cuts and budget deficits

Taras Smereka — Wed, 01 Jul 2009 01:20:44 GMT

Depends what side of laffer's curve you are on (which is impossible to tell, too many variables)

better to just cut spending (hypothetically, governments almost never do)

Re: Tax-cuts and budget deficits

ladyattis — Wed, 01 Jul 2009 01:02:33 GMT

In terms of revenues generated, tax cuts lead to greater revenues. But the budget deficits are a backdoor method to inflating currency as to 'swallow' government debts. Thus, it's one of the most common mechanisms to push 'public' programs (wars on ideas and such).

Tax-cuts and budget deficits

Individualist — Wed, 01 Jul 2009 00:47:55 GMT

Do tax-cuts compensate for budget deficits to any degree?