deficits and future taxes


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(email exchange)

The latest noise is that today’s deficits mean higher taxes later.

Answer:

1. Taxes function to reduce aggregate demand.

2. A tax hike is never in order with a weak economy, no matter how high the deficit or how high the interest payments may be.

3. Future tax increases would be a consideration should demand rise to the point where unemployment fell ‘too far’- maybe below 4%.

4. That is a scenario of prosperity and an economy growing so fast that it might be causing inflation which might need a tax hike or spending cut to cool it down.

So when someone states that today’s high deficit mean higher taxes later, he is in fact saying that today’s high deficits might cause the economy to grow so fast that it will require tax increases or spending cuts to slow it down.

Sounds like a good thing to me — who can be against that?

And, of course, the government always has the option to tax interest income if interest on the debt is deemed a problem at that time.

>    On Fri, Jun 12, 2009 at 8:46 AM, James Galbraith wrote:
>   
>   A comment in the National Journal, on the ever-green deficit alarmism that so preoccupies
>   people in Washington, to no good effect.
>   
>   Also, my June 5 lecture in Dublin, at the Institute for International and European Affairs, on the
>   crisis.
>   
>   With Q&A
>   
>   And a small postscript, reprising the old story of Eliza in Cuba, which I’ve promised her I
>   will now retire
>   
>   Jamie


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One Response to deficits and future taxes

  1. Keynes Liquidity Fetish says:

    “1. Taxes function to reduce aggregate demand.”

    I see lots of demand for seats at the local football stadium. I see little demand for seats at the local science competition. I do not agree with this societies long term future direction with such backwards policies. Football games do not bring about 3d solar cell research. I think football games need a 1 million percent tax increase.

    I wish to go to a society that is in more agreement with my personal beliefs but the USA IRS man will not allow this, what is left for me to do?

    “3. Future tax increases would be a consideration should demand rise to the point where unemployment fell ‘too far’- maybe below 4%.”

    I do not agree with this, for far too long, we have had far too much useless employemnt – busywork that kept the numbers around 4-5% but that served no real public purpose other than keeping busy hands idle. It did not advance our science or knowledge or make the world fundamentally a better place and going forward china is going to destroy us.

    “4. That is a scenario of prosperity and an economy growing so fast that it might be causing inflation which might need a tax hike or spending cut to cool it down.”

    Politically impossible under the current crony capitalist system with only 500 congressmen. Must lessen the IMMENSE centralization of power into so few hands. One way to do this is to increase the 500 congressmen to 5000 to make them more beholden to individual voters and less to lobbyists, there are other ways too. Real estate transactions needed a huge tax increase, instead we got lots of people being real estate agents.

    “So when someone states that today’s high deficit mean higher taxes later, he is in fact saying that today’s high deficits might cause the economy to grow so fast that it will require tax increases or spending cuts to slow it down.”

    EDITED

    “And, of course, the government always has the option to tax interest income if interest on the debt is deemed a problem at that time.”

    NO – as Warren has stated – congressmen keep being shown the truth in regards to things like the USVI 4% sillyness and other tax fraud and tax schemes but never vote it down. There are billions of options, but REALITY PROVES it is usually the corrupt crony option that gets picked in this environment.

    It makes no sense to try and fix the fly by wire system on the plane after the wings have fell off and you are plummeting to your death. Better to fix it in the engineering room before the plane ever takes off. The way the US government works, fundamental checks and balances need to be completely RESTRUCTED to reflect the present time before ANY of these economic polices will be able to be implemented.

    Reply

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