I mentioned in a comment yesterday that I’m working on an article discussing the relationship between income taxes and unemployment. Before I finish that and post it, I wanted to follow up on my previous fiscal analysis article.
I got some interesting feedback on that article. One conservative responded privately with what amounted to a “well, duh!” He said that my article boiled down to the following (paraphrased) statement:
Hold everything else constant, and increasing government spending, which is included in the GDP calculation, increases GDP.
On one level, he’s correct. It’s pretty obvious that, holding everything else constant, increasing government spending will increase GDP in the same year. This is why I looked for an offset impact. If spending this year increases GDP in future years, holding everything else constant, then you have a more interesting story. That’s what I was looking for.