Simon Johnson: Tax Cut Package Is Voodoo Economics Revisited

Project Syndicate:

WASHINGTON, DC - Democratic and Republican leaders in Washington are suddenly falling over themselves to agree on the need for major tax cuts - affecting not just middle-class Americans, but also very rich people (both living and when they die). Does this sudden outbreak of the long-desired bipartisan consensus indicate that a new, stronger America is just around the corner?

Read the whole story: Project Syndicate

Comments

[Imzadi]

07:32 AM on 12/20/2010

Yes, indeed. But people never learn... *sigh*

[Kassandra]

08:42 PM on 12/19/2010

And right in our faces too.

[Danlar]

07:17 PM on 12/19/2010

Voodoo Economics: cut taxes first then promise token spending cuts sometime later (never)
I used this term in a letter to the editor recently but sadly I feel most don't get the historical reference.
Fox news needs to revisit this debate and the important term coined by HWBush Voodoo Economics. will they? prob not.

[Kassandra]

08:45 PM on 12/19/2010

Oh they'll cut spending. They'll start with the disabled...education, food stamps, etc.
It's already being done.
why would Fox even mention this to it's viewers who blame liberals for everything wrong with the country. They'll really wonder when it happens to Grandma nor themselves. But they'll still blame the liberals

http://news.firedoglake.com/2010/12/17/obama-trusted-to-cut-deficit-republicans-gunning-to-make-that-happen-asap/

[Rickerman]

06:42 PM on 12/19/2010

JFK was our last elected President. Since we were robbed of Him; we have been robbed by Them.

[Kassandra]

08:45 PM on 12/19/2010

too true. F+F

[marijam]

12:26 PM on 12/19/2010

Yes, Larry Kudlow is crowing about the return of Reaganomics.

[DrRoberts99]

08:53 AM on 12/18/2010

Question: When is the new round of tax-cut extensions like voodoo economics?

Answer: "To be sure, no serious people are claiming the full Reagan effect today..."

In other words sports fans, the tax cut package is not Vodoo Economics Redux according to Mr. Johnson himself since nobody is claiming that extending the tax cuts will in fact result in increased tax revenues(otherwise known as Supply Side Economics), but why let that fact get in the way of a sensationalistic headline.

Economists need to declare that either they still subscribe to the principles of Keynesian Economics or that they do not. And if they don't, they damn well better present a theory that they can at least claim is superior.

Memo to Mr. Johnson, let's turn our powers of persuasion towards reducing the deficit after the economy has sufficiently recovered as to not be in danger of slipping backwards.

[muck-raker]

06:40 PM on 12/17/2010

.............................................ONE WORLD ORDER....................

listen................ http://video.google.com/videoplay?docid=-3716943478240597133#

[Carl Caroli]

06:12 PM on 12/17/2010

Bush broke his promise of no new taxes and lost. Obama broke his tax promise too.

[PlutocratsSuck]

04:42 PM on 12/17/2010

Considering the isolative effects of wealth, this is hardly surprising. I didn't really need a study to tell me many rich people are A holes though.

[taikan]

01:12 PM on 12/17/2010

The voodoo wasn't in the economics, it was in the politics. Reagan and his campaign advisers realized that the true "great American dream" is to have whatever you want without having to pay for it.

In essence, what Reagan sold to the American voters was the concept that they could have what they wanted without having to pay for it. Thus, they lowered taxes, reducing the federal government's revenues without reducing the federal government's expenditures. As a result, the voters (and the corporations, one mustn't forget them) got the benefit of continuing government expenditures without having to pay for them.

All of this was made possible by the fact that when Reagan took office, the United States was the biggest creditor in the world. By the time he left office, the United States was the world's largest debtor. However, it still had good credit, and the budget surpluses that Clinton engineered strengthened the US' credit rating. As a result, America was able to continue borrowing from the rest of the world. However, just as individuals eventually reach the limits on their credit cards, America is now faced with the prospect of reaching its limit on how much it can borrow from the rest of the world.

[hypnotoad72]

01:17 PM on 12/17/2010

And as revenues decline, things will only constrict further. (in terms of government AND workers. CEOs are robbing both entities blind. http://www.progress.org/cwfedex.htm and http://motherjones.com/kevin-drum/2010/01/vicious-cycle-stagnant-wages being two examples, of many, to illustrate the situation). We tell people they are miracles and pro-life is good. Then we educate people to work for someone else for paltry pittances of wages and hope they can't get health benefits because that, like time, costs too much time and therefore profit. Not much of a miracle after all, if that's how valueless we treat life once it slides out of the chute...

[Countess]

12:39 PM on 12/17/2010

Serious reporting would be telling the American people that this is all about the corrupt political system and the president needing to convince wall street that he is still worthy of getting a nice chunk of their cash for his campaign in 2012 but since there is a consensus in the mainstream media never to discuss the legalized corruption within the political system we will continue having only the most superficial reporting.

[Rodger leMonde]

12:04 PM on 12/17/2010

Third world here we come. We are definitely compromised. If I had grand kids I would be going nuts about now worrying about them.

[drkazmd65]

11:52 AM on 12/17/2010

It didn't work long-term (or really well short-term) the last time we tried this particular bit of economic vodoo when the economy was stronger, we actually manufactured products in America, and when we had a far less massive debt-load.

What makes anybody with half a functioning brain think it will work this time?

One of the definitions of Insanity is doing the same thing over, and over, and expecting a different result.

We (if we buy into this crapola) and our 'leaders' are apparently nuts.

[hypnotoad72]

01:17 PM on 12/17/2010

Our leaders get rewarded handsomely to keep helping the few at the cost of the whole.

[SequimBob2]

03:48 PM on 12/17/2010

Sad, but true. Too bad they "make it so."

[Madison Lib]

11:34 AM on 12/17/2010

It's very simple really. We have a society that needs certain elements well funded to keep the thing moving. When you actively take small chunks of wealth from a large group and give it to a small group, that second group gets rich quickly and the large group gets poor slowly. The process is nearly complete. Now what do we do?

[marijam]

12:28 PM on 12/19/2010

Stop voting since its meaningless anyway?

[Ron Quintia]

10:59 AM on 12/17/2010

..I am no economist...but I've been around long enough to see that the economics of any one entity becomes extremely hard if not impossible to predict...It's apparent that much argument exists between scholars of economics...some say the new tax bill is great, some say nahh, not so great...this stuff makes for great argument and talking points...the problem is that the economic peril of so many millions in this country hinge on the experimentation, bias, political wind, and a host of other factors that are often more subjective than objective...and we don't seem to learn by history...

[SequimBob2]

03:56 PM on 12/17/2010

I'm not an economist either, but you don't have to be economist to be frustrated by our continued unwillingness to balance the books. We're spending one-third more than we are receiving in taxes. 80% of tax revenue is spent in the following areas: Soc Security, Defense, Unemployment, Medicare, Medicaid, SCHIP, Welfare and interest on the debt. Sadly all other Government functions are funded with borrowed money. In fact, our current receipts don't fully cover the above areas.

Until recently, I was convinced it was just political weakness. Now, I believe that the Republicans are using the debt issue to attack Social Security and entitlements.

[marijam]

12:29 PM on 12/19/2010

Welcome to reality, not conspiracy.