Oldstyle says: You don't finance the spending by raising taxes...not if you believe in Keynesian economic principles.
Rshermr responds: Again, oldstyle, you are all caught up in believing or not believing in an economic theory, in this case, Keynsian Economics. Go look at the other versions and takeoffs of Keynsian economics, like neo keynsian economics. Or, more importantly, other economic theories. It is stupid to believe entirely in a single economic theory. Today, you need stimulus spending which is the primary Keynsian premis. How you finance it is the issue. And you can not go back today to get revenue from good economic times since that money has been spent.Oldstyle says: Keynes advocated raising taxes in boom periods to pay back the money that was borrowed to stimulate during bust periods. He did not advocate raising them in a bad economy, something that Christina Romer agreed with last year when asked if taxes should be raised...stating that a during a bad economy was the wrong time to raise taxes on "anyone".
Rshermr responds: But later stated that a tax increase had to be part of the economic plan. The link below is to an article in the NY Times by Ms. Romer. It is the full context of her view of which you have taken a bit out of context. Overall, tax increases are necessary.
http://www.nytimes.com/2011/07/03/business/economy/03view.html
Oldstyle says: Since raising taxes in a bad economy was seen as a further damper on economic growth, Keynes would not have agreed with President Obama's planned tax increase on the rich. He would have been in favor of more stimulus...with the intent of repaying that borrowed money with increased taxes when the economy rebounded.
Ah, but you disagree with those who have looked at the current political economic environment. So the question for them would be "which republican congressmen are going to agree to tax increases in the future. Are you able to assure anyone that their pledge to Grover Norquist will not have meaning in the future? Can you assure anyone that the republican congress will not require decreases in spending to cover the increase in spending required for stimulus spending to work? Of course you can not. So, why are you still on the Keynsian bandwagon, pushing for no new tax increases, as are all the repubs in about every repub outlet in existence. The concept you are pushing does not pass the giggle test, oldstyle.
Oldstyle says: On the other hand, Keynes would have been in favor of Clinton's tax raises because the Dot Com boom stimulated the economy to a point where taxes COULD be raised.
Rshermr replies: Interesting idea. The problem was the .com bubble, which most repubs want to say was not a bubble, happened AFTER the tax increases and resultant spending. Remember the famous saying, oldstyle, that said ITS THE ECONOMY STUPID. The economy got better AFTER the tax increases, not before it. Integrity, me man. But beyond that, what is known today about tax impacts on the economy is much, much greater than during Keynes day.
Once again I disagree with your "take" on what happened during the Clinton Presidency. The following article from Forbes encapsulates what Clinton did with taxes during his eight years in office and how his actions affected the economy.
""The real lesson of the Clinton Presidency is the way back to prosperity lies not through increased taxes on “the rich,” but through tax and regulatory reform and a return to a rules based monetary policy that produces a strong and stable dollar."(Image credit: AFP/Getty Images via @daylife)
One of the most dangerous myths that has infected the current debate over the direction of tax policy is the oft repeated claim that the tax increases under President Bill Clinton led to the boom of the 1990s. In their Wall Street Journal Op-Ed last Friday, for example, Clinton campaign manager James Carville and Democratic pollster and Clinton advisor Stanley Greenberg write the increase in the top tax rate to 39.6% “produced the one period of shared prosperity in this past era (since 1980).”
While this myth is now a central part of liberal Democratic folklore, it is contradicted by the political disaster and poor economic results that followed the tax increase. The real lesson of the Clinton Presidency is the way back to prosperity lies not through increased taxes on “the rich,” but through tax and regulatory reform and a return to a rules based monetary policy that produces a strong and stable dollar.
The 1993 Clinton tax increase raised the top two income tax rates to 36% and 39.6%, with the top rate hitting joint returns with incomes above $250,000 ($400,000 in 2012 dollars). In addition, it removed the cap on the 2.9% Medicare payroll tax, raised the corporate tax rate to 35% from 34%, increased the taxable portion of Social Security benefits, and imposed a 4.3 cent per gallon increase in transportation fuel taxes.
If these tax increases were good for the middle class, then they should have been popular. Yet, in the 1994 elections, the Democratic Party suffered historic losses. Even though Senate Majority Leader George Mitchell had declared the unpopular HillaryCare dead in September of that year, the Republican Party gained 54 seats in the House and 8 seats in the Senate to win control of both the House and the Senate for the first time since 1952.
Second, Messrs. Carville and Greenberg are contradicted by their former boss. Speaking at a fund raiser in 1995, President Clinton said: ”Probably there are people in this room still mad at me at that budget because you think I raised your taxes too much. It might surprise you to know that I think I raised them too much, too.”
During the first four years of his Presidency, real GDP growth average 3.2%, respectable relative to today’s economy, but disappointing coming as it did following just one year of recovery from the 1991 recession, the end of the Cold War and the reduction in consumer price inflation below 3% for the first time (with the single exception of 1986) since 1965.
For example, it was a half a percentage point slower than under Reagan during the four years following the first year of the recovery from the 1982 recession.
Employment growth was a respectable 2 million a year. But real hourly wages continued to stagnate, rising only 2 cents to 7.43 an hour in 1996 from $7.41 in 1992. No real gains for the middle class there.
Federal government receipts increased an average of $90 billion a year while the annual increase in federal spending was constrained to $45 billion. That led to a $183 billion, four-year reduction in the budget deficit to $107 billion in 1996.
However, with his masterful 1995 flip-flop on taxes, President Clinton took the first step toward a successful campaign for re-election and a shift in policy that produced the economic boom that occurred during his second term.
Welfare reform, which he signed in the summer of 1996, led to a massive reduction in the effective tax rates on the poor by ameliorating the rapid phase out of benefits associated with going to work.
The phased reduction in tariff and non-tariff barriers between the U.S., Mexico and Canada under the North American Free Trade Agreement continued, leading to increased trade.
In 1997, Clinton signed a reduction in the (audible liberal gasp) capital gains tax rate to 20% from 28%.
The 1997 tax cuts also included a phased in increase in the death tax exemption to $1 million from $600,000, and established Roth IRAs and increased the limits for deductible IRAs.
Annual growth in federal spending was kept to below 3%, or $57 billion.
The Clinton Administration also maintained its policy of a strong and stable dollar. Over his entire second term, consumer price inflation averaged only 2.4% a year.
The boom was on. Between the end of 1996 and the end of 2000:
Economic growth accelerated a full percentage point to 4.2% a year.
Employment growth nudged higher, to 2.1 million jobs per year as the unemployment rate fell to 4.0% from 5.4%.
As the tax rate on capital gains came down, real wages made their biggest advance since the implementation of the Reagan tax rate reductions in the mid 1980s. Real average hourly earnings were (in 1982 dollars) $7.43 in 1996, $7.55 in 1997, $7.75 in 1998, $7.86 in 1999, and $7.89 in 2000.
Millions of Americans shared in the prosperity as the value of their 401(k)s climbed along with the stock market, which saw the price of the S&P 500 index rise 78%.
Revenue growth accelerated an astounding 59%, increasing on average $143 billion a year. Combined with continued restraint on government spending, that produced a $198 billion budget surplus in 2000.
Shared prosperity indeed! But one created not by raising tax rates on high income but not yet rich middle class families, and certainly not by raising the capital gains tax rate or by imposing the equivalent of the Buffett rule, a new alternative minimum tax of 30% on incomes over $1 million, nor by massively increasing federal spending.
Rather, it was a prosperity produced by freeing America’s poor from a punitive welfare system, lowering tariffs, reducing tax rates on the creators of wealth, limiting the growth of federal government expenditures, and providing a strong and stable dollar to businesses and families in America and throughout the world.
A shared prosperity can be achieved again. But to do so, the American people will have to overcome the envy feeding myth perpetrated by President Barack Obama and the spin-masters and leadership of the Democratic Party that raising tax rates on high incomes will somehow lead to more job creation, more opportunity and increased prosperity and security for the middle-class."
The liberal "myth" that Clinton spurred economic growth because he slightly raised tax rates on the top 1.2% ignores the fact that he cut the effective tax rates on most people with a revamping of the welfare system, deep cuts to the tax on capital gains, increased the limit of what people could put into their 401K's and increase the taxable limit on the death tax by 40%. Show me where Barack Obama is doing ANY of those things and if those things aren't included in his fiscal plans then explain to me what is going to drive the economic engine to expand.
