We should probably begin with his explanation for why he thinks
\ngovernment stimulus doesn’t work the way the Obama administration
\nhopes. Here’s Boudreaux:<\/p>\n
<\/i>I’m in the camp — it’s in the minority — that argues that stimulus
\nis not good policy for a couple of reasons. First, money taken to spend on
\nstimulus projects are taken from elsewhere in the economy. The second thing, the deeper problem, is what’s being stimulated? For the past eight years leading up to the crash,
\nwe had a lot of economic activity that everybody understands was built on
\nwealth that wasn’t there. People were employed doing things they
\nshouldn’t have been doing. A lot of it came through the real estate
\nsector. If the stimulus keeps people in these jobs that they shouldn’t
\nhave been in to begin with, we’re just delaying the day of reckoning. I
\nwant to see the economy adjust to a more sustainable growth path where
\npeople are not artificially propped up by bubbles or by stimulus, which
\nI worry is is the case now. That said, we can debate giving unemployment assistance.<\/p>\n
So the jobs bill: Here’s a $15 billion plan to give companies who
\nhire unemployed Americans an exemption from paying payroll taxes on
\nthose workers through the end of this year. It also provides a $1,000
\ntax credit to employers who keep new workers on the payroll for at
\nleast for 52 weeks. Will it work?<\/p>\n
<\/b>As you know, I’m very skeptical of the whole stimulus idea to begin
\nwith. The problem with a tax credit for hiring new workers is maybe
\nthat a lot of those workers shouldn’t be hired where they’re gonna be
\nhired. I’m a tax cut kind of guy. I’m always aiming for tax cuts. If we
\nwant to get the economy back on a sustainable long run track of
\neconomic growth we don’t want to bias the economy in favor of capital
\nor labor. If we’re going to have tax cuts we want them in general so
\nfirms are not biased to use capital in bias of labor. That might be
\ngood for labor in the short run. In the long run, it’s not good for
\nlabor because workers wages tie closely to productivity, which is tied
\nclosely to the amount of productive capital they have to work with. So
\nby biasing the production in favor of labor, you put more people to
\nwork today but you reduce capital and productivity, which means their
\ncompensation in the long run will be lower. These are gimmicks. I
\nrealize politically that employment is a big problem, but you can solve
\nthat problem just as well with general across the board tax cut tax
\ncredits that aren’t targeted at one factor of production.<\/p>\n
The
\nadministration is stuck with terrible unemployment, but also a $1.6
\ntrillion deficit that’s getting slammed. So let’s say you were the
\npresident’s Jobs Czar. You have his ear. What do you tell him?<\/b><\/p>\n
I would say cut taxes generally.<\/p>\n
What kind of taxes? Payroll?<\/b><\/p>\n
I
\nwould cut payroll taxes and corporate profits taxes. By cutting the tax
\non corporate profits you don’t bias employers toward labor. If you
\nreally are worried about the deficit being too high and you really do
\nwant to put private sector business activity back on the tracks and
\nmoving along so that more workers are hired and wages rise, you have to
\nmake it more attractive for business in general to produce more.
\nCutting corporate taxes does that, if you’re asking me as your economic
\nadviser to get employment going in a sustainable pro-growth way.<\/p>\n
Would you make the cut temporary for budgetary reasons, or would you make it permanent?<\/b><\/p>\n
If
\nit were up to me I would eliminate the tax on corporate profits. I
\nwould make it permanent. If you announce that it will only be temporary then it won’t have the stimulus effect. It’ll have some, but a lot of
\nproduction plans go on well beyond three years. If they’re building a
\nfactory that’s in operation 16 years down the road, you diminish the
\neffect if you limit the time. I would prefer a temporary cut to no
\ncuts. But still, a permanent tax credit to hire new workers still
\nreally biases the production decisions.<\/p>\n
One concern here would be that you’re cutting taxes dramatically on
\ntop of a significant deficit. In fact, the size of the deficit is
\nmaking some budget experts call for additional<\/i> taxes, like a
\nbroad based consumption tax, or value added tax (VAT), possibly in
\nexchange for slight reductions in the income tax. What would you say to
\nthat deal?<\/b><\/p>\n
I am very leery not so much for economic reasons,
\nbut because the income tax has been so deeply instituted into the
\npolitical structure in America that I can’t really imagine it being
\nsignificantly scaled back. As I understand it, the idea is we’ll move
\nto a VAT and we’ll get revenue from there and we’ll offset revenue from
\nthe consumption tax by eliminating the tax on middle and upper class
\nincome and corporate profits. Right?<\/p>\n
Politically, I’m skeptical that that would happen. Academically I think
\nyou can have a serious and interesting debate about the virtues of
\nincome and consumption tax. And if I had to choose between the two in a
\nhypothetical world where the taxes are implemented with the best
\ninterests of the public in mind, I would probably go with the
\nconsumption tax. I’m sure I would, in fact.<\/p>\n
I could imagine two
\nyears from now, if there’s another terrorist attack or the recession
\ndeepens, or whatever emergency happens: whatever party’s in Washington
\nsays we need more revenue and the income tax is still there, so they
\nstart using it again. People are accustomed to paying income taxes.
\nWith a VAT, it’s more hidden. You walk into a store and you pay the
\nprice that’s listed and it’s not obvious to you what portion is tax. We
\nwon’t pay attention to it in the same way there’s an income tax form
\nthat you mail in in April. I’m worried that the political deal won’t
\ntake place as advertised.<\/p>\n
*Corrected. Here’s why the government stimulus worked: it kept hundreds of thousands of Americans at work, at least. It added percentage points to GDP. It sent billions of dollars to unemployed and low income Americans to prop up private demand as consumption was ready to fall off a cliff. That’s my take anyway, but not everybody […]<\/p>\n","protected":false},"author":1534,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-358121","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/358121","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1534"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=358121"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/358121\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=358121"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=358121"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=358121"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n
\n 
<\/a>
\n 
<\/a>
\n 
<\/a>
\n 
<\/a>
\n 
<\/a>
\n 
<\/a>
\n 
<\/a>
\n
\n<\/a>
\n<\/p>\n","protected":false},"excerpt":{"rendered":"
![\"\"](\"http:\/\/a.rfihub.com\/eus.gif?eui=2225\"\/)