Saturday, October 7, 2017

Bad Argument for Tax Reform: The Keynesian Edition

John Maynard Keynes
By Veronique De Rugy

It is often the case that when one party is in power, some of their principles are thrown out the window. Remember when President George W. Bush, who had already presided over a large increase in spending — not just on defense — and the creation of a new entitlement program, explained that he “had to abandon free market principles to save the free market system”?

 I could spend the day listing the too-many instances where Republicans and their supporters are willing to abandon free market principles not in the name of saving the free market but politics or special interests. But I won’t bore you with that. Instead, I want to highlight this disturbing use of a Keynesian argument to justify not making the tax cuts deficit neutral:
White House Budget Director Mick Mulvaney is signaling similar flexibility, saying on CNN Sunday that decisions about deductions remain up in the air as “the bill is not finished yet.” He took it a step further, by adding that a tax plan that doesn’t add to the deficit won’t spur growth. “I’ve been very candid about this. We need to have new deficits because of that. We need to have the growth,” Mulvaney said. “If we simply look at this as being deficit-neutral, you’re never going to get the type of tax reform and tax reductions that you need to get to sustain 3 percent economic growth.” 

Come again? We need deficits, meaning overspending, to bolster the economy? And Mick Mulvaney said that?

Read the rest here.

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