Keynes Redux

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.


About Michael Weiss

Michael is now located at http://www.logarchism.com, along with Monotreme, filistro, and dcpetterson. Please make note of the new location.
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28 Responses to Keynes Redux

  1. Bart DePalma says:

    Michael:

    What does a good Keynesian like yourself think about raising taxes in a recession?

  2. I think that any economic theory should be examined retrospectively where possible. You will see my retrospective analysis soon.

  3. Monotreme says:

    From Twitter.

    @SarahPalinUSA
    Pls refer to Jan.1 tax changes appropriately: they’re OBAMA TAX HIKES & they’ll slam every American’s savings, investments & job opportunity

  4. dcpetterson says:

    “OBAMA TAX HIKES”? Talk about Orwellian double-speak!

    Republicans have no shame. Totally beyond redemption.

  5. filistro says:

    So the automatic sunsetting provisions put in place by GW Bush kick in… and become OBAMA TAX HIKES.

    One is reduced to Olbermann’s line every time he is forced to report on some new atrocity from Palin. He tosses the cue card aside, leans into the camera and fixes it with a baleful eye.

    That woman,” he announces, “is an idiot.”

    Besides, if she doesn’t stop tweeting, GROG will be so busy protecting her, he’ll never get anything done. Now he has to spend the entire day patiently explaining to us how these really ARE “Obama’s tax hikes.”

  6. Bart DePalma says:

    dc:

    When a person pays more taxes in 2011 than in 2010 on the same income, the government increased her taxes – period.

    If a party either affirmatively enacts legislation raising the taxes or declines to enact legislation reversing a prior timed tax increase, that party is culpable for increasing that person’s taxes – period.

    The contrast in how the Dems talk about the wealthy and the rest of us taxpayers is telling. When discussing the wealthy, they oppose “tax cuts.” When talking about everyone else, they talk about the need to avoid tax increases.

    Typical.

  7. dcpetterson says:

    Bart, you are totally ignorant of history, aren’t you?

    And words mean whatever you want them to mean, right? Is your middle name Dumpty?

  8. dcpetterson says:

    By the way, Bart, explain to me — if lower taxes create jobs, why were more than 20 million jobs created under the Clinton tax structure, but less than 2 million created under the lower Bush taxes? If leaving in place the Bush tax cuts for the wealthy is going to create jobs, why didn’t the Bush tax cuts for the wealthy create jobs for the last ten years?

  9. @ DC 6:36am- Is that the sound of crickets?

  10. filistro says:

    fopsie wins the award for Most Intriguing Avatar 🙂

  11. @ Fili – Can you tell what it is?

  12. filistro says:

    So, courtesy of your friendly Tea party, here’s pretty much the ultimate in “trickle-down economics”…. let’s disenfranchise the poor!

    From the article: Tea Party Nation President Judson Phillips said denying the right to vote to those who do not own property “makes a lot of sense” during a weekly radio program. “The Founding Fathers originally said, they put certain restrictions on who gets the right to vote,” Phillips said. “It wasn’t you were just a citizen and you got to vote.”

    “Some of the restrictions, you know, you obviously would not think about today,” he continued. “But one of those was you had to be a property owner. And that makes a lot of sense, because if you’re a property owner you actually have a vested stake in the community. If you’re not a property owner, you know, I’m sorry but property owners have a little bit more of a vested interest in the community than non-property owners.”

  13. Bart DePalma says:

    DC:

    No one said that tax rates are the only way governments can royally screw up an economy and employment, although it is a common means. (See the Smoot Hawley Tariffs, the Hoover Millionaries tax hike and the FDR increases followed by a decade long Depression).

    Clinton only has a better job record than Dubya if you credit Dubya with 9/11 and give Clinton a pass on the mortgage mess and housing bubble collapse he was key in creating. This is not to excuse Dubya for his part in the mortgage mess and housing bubble collapse (which I do not). However, you cannot blame him for enacting the regs and setting up Fannie and Freddie as secondary markets for the subprime folly. That was all Clinton apart from a 2003 Bush HUD increase in the Freddie and Fannie portfolio of junk mortgages.

    As to the Clinton and Bush tax rate changes, just compare the CBO static estimates for both with the actual results. CBO overestimated the economic growth after the Clinton rate increases and the resulting tax revenues were half those projected. In contrast, CBO grossly underestimated the economic growth after the Bush rate reductions and the resulting double digit increases in revenues.

  14. filistro says:

    Fopsie… I’m still puzzling over it. I see the dogs, of course, and the really cool bench… but I can’t make out what the big drum-like thing is behind the bench and I have a feeling it’s probably the key to the whole puzzle.

  15. Fili – Wow, you have good eyes! It is a bench that I built for a friend. The drum-like thing is just an oscillating sander that wasn’t even used on the bench. There is no special significance to the photo, it’s just the first one I stumbled on when I signed up for the gravatar-thingie.
    The dogs love being my assistants. They are always very curious as to what I’m doing.

  16. filistro says:

    Fopsie… that bench is just awesome. I love it.

  17. Fili – Do you want one? The bench portion is California Live Oak and the legs are Walnut branches.

  18. Monotreme says:

    People who love dogs are wonderful. That is all.

  19. Thanks Mono. People who have hedgehogs as their avatar are pretty cool too.

  20. filistro says:

    Fopsie… that’s not a hedgehog. It’s a spiny echidna.

    Cute, eh? Montremes lay eggs and suckle their young. Ours is a rare bird… er… mammal. But he’s killer cute 🙂

    As for benches… I’d love one, but my place here is a swanky condo and my place in Vegas is in a gated community where the HA frowns on outdoor planters (and dogs taller than 7 inches) let alone lovely rustic hand-hewn benches. Sigh…

  21. Please accept my apologies for species misidentification.

    Did you ever see that cartoon in the New Yorker showing a drawing of the zoo entrance? The sign said “Zoo – a gated community for animals.”

  22. dcpetterson says:

    Bart
    No one said that tax rates are the only way governments can royally screw up an economy and employment,

    So, you admit taxes are not the only feature to consider in an economy. And even that despite lower taxes, Republican economic policies screwed the economy and employment.

    Let’s just return to Clinton’s economy, shall we? That worked.

  23. dcpetterson says:

    Dogs and benches and echidnae. This is where the cool kids live.

  24. Fili: I can make stuff other than benches. I have milled a lot of oak (& other stuff) from around these parts. I have some 36″ wide live edge slabs that would make a great dining table. I am not looking to make money. I just want to make stuff.

  25. filistro says:

    Fopsie… people LOVE hand-hewn wood products. You should make a few things and take them to a local gallery or shop on consignment. I’m betting they could sell everything you give them.

  26. Fili: Well, I do have a bit of a problem. While I am a decent engineer, I am sorely lacking in the design abilities. It would hurt my psyche greatly if I wasted some neat materials on a crummy design.

    I would like to add that I never cut down living trees. I like them after they’ve been laying around for a decade or so.

  27. Montana says:

    Tea anyone?

    Judson Phillips is a fool, so all our military personnel, firemen, policemen and elderly who don’t own property can’t vote?

    How about all people who have filed bankruptcy can’t vote (like Judson Phillips), or those who fail to answer questions basic about our country history can’t run for public office (like Sarah Palin or Christine O’donnell), how about that, please.

    So what do you think these losers want next, SLAVES?

  28. shiloh says:

    Dana Perino, Bush’s dimwit press secretary had never heard of the Cuban Missile Crisis ?!?

    apologies to dimwits …

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