I realize the title of this post sounds like the beginning of a joke, along the lines of “A priest, a minister, and a rabbi walk into a bar…”, but this is a serious topic.
A big problem in fiscal debates is that people can’t even agree on what they mean by certain words. For instance, what’s the definition of austerity? Is it budget cuts, higher taxes, or both? Why are people saying the United Kingdom is practicing austerity, when the burden of government spending is going up?
Or how do we define responsible fiscal policy? Should politicians try to balance budgets, or should they shrink the burden of government? Is it reasonable for some people to call Obama a conservative because he wants higher taxes and claims the money would be used to reduce red ink?
I grapple with some of these questions in this appearance on Fox Business News.
But I’m not happy with my performance, largely because there needs to be a simple way of categorizing the various approaches to fiscal policy. So that’s what I’ve done in this Table. This is a first draft, so I welcome suggestions.
I’m serious about looking for input, For instance, I would like to come up with some way to describe Bushonomics without sullying the name of supply-side economics.
But perhaps I am just sensitive to that issue because supply-side economists tend to be serious and sober people who favor smaller government, but some of the politicians associated with supply-side economics – such as Jack Kemp – have been unapologetic big spenders.
I’m also unhappy with the division between IMFers and Keynesians, which is strange because it seems like half of my time is devoted to battling statists who argue for more government spending and the other half is consumed by fights against proponents of higher taxes.
What makes this so frustrating, though, is that Keynesians and IMFers are usually the same people, even though the philosophies are supposedly inconsistent.
I suspect that all they really want is bigger government, and they use any sign of weakness to argue for more spending, and then they quickly pivot and ask for higher taxes because of red ink. The biased analysis of the Congressional Budget Office is a good example.
The right approach, needless to say, is libertarianism. Small government and low tax rates are the pro-growth, pro-freedom recipe. That’s the one part of the Table that’s right on the mark.
I think the Keynesian approach definitely depends on the condition of the economy. In prosperity, the government should give the market relatively free reign (many Keynesians tell us). But when the economy need stimulus, the government needs to step in. Keynesians would tell you to run a budget deficit in times of economic hardship, but not to do so in times of prosperity (Clinton is a good example).
As GW Bush with Chuck Grassley’s and many other Republican partiers’ support signed a tax bill that increased overseas Americans’ tax liabilities, there likely should be an asterisk on the second column entry at “Stereotype . . .” row. A check-minus to him for having picked on an unrepresented minority of Americans and also thereby promoting the hiring of Australians, Canadians and Englishman (none of whom have tax liabilities back home for income earned offshore) at nominally US companies with operations abroad.
How about the GWB / Cheney Theory summed up as, “Deficits don’t matter” against the rising tide of revenue theory with receipts covered spending of the good supply side?
I think you have it exactly. More government is never a solution, only more of a problem. Increasing tax rates will not lead to increased revenue, only to less business, jobs, investment. Obama and company are keeping the economy boat afloat by drilling holes in the bottom. No one can convince them it will not let the water out.
Dan, you are Absolutely right! Libertarianism is the path to follow…
I think supply-side thinking comes out of despair that we will ever be able to actually reduce government unless we are forced to by creditors. Wasn’t it Reagan who talked about the need to “starve the beast?” And when asked whether a surplus should be used to reduce debt or cut taxes, Milton Friedman said cutting taxes was the only answer because government would find new ways to spend it rather than reducing debt. Starving the beast through cutting taxes may be our only way to slow government growth because China will eventually decide we’re not a good risk.
It seems like the differences here stem from where each of these groups of folks believe wealth and prosperity originates from.
For Libertarians this is either a foundation principle or fantastic outcome of their morally-chosen philosophy (I always wonder if they would still choose it morally, though, if it didn’t have this great side effect).
Supply-siders sort of get it,
Keynesisans don’t seem to give it some thought. They seem to think they can trick the process.
The source of wealth creation doesn’t even seem to be on the radar for IMF’ers.
I am not holding my breath; Congress and the president wield so much power through the tax code that it’s hard to imagine enough of them having the courage to forfeit it for the good of the country.
The Fairtax is the solution your looking for good sir.
Forgot to put the website.. Sorry.
Fairtax.org is the official website.
[...] What’s the Difference between a Libertarian, a Supply-Sider, a Keynesian, and an IMF Bureaucrat? Is Mitt Romney a Keynesian? If Even the International Monetary Fund Acknowledges the Laffer Curve, Why Doesn’t Obama Realize that Higher Tax Rates are All Pain and No Gain? Daniel Mitchell’s Blog [...]
[...] What’s the Difference between a Libertarian, a Supply-Sider, a Keynesian, and an IMF Bureaucrat? Is Mitt Romney a Keynesian? If Even the International Monetary Fund Acknowledges the Laffer Curve, Why Doesn’t Obama Realize that Higher Tax Rates are All Pain and No Gain? Daniel Mitchell’s Blog [...]
[...] What’s the Difference between a Libertarian, a Supply-Sider, a Keynesian, and an IMF Bureaucrat? Is Mitt Romney a Keynesian? If Even the International Monetary Fund Acknowledges the Laffer Curve, Why Doesn’t Obama Realize that Higher Tax Rates are All Pain and No Gain? Daniel Mitchell’s Blog [...]
[...] not fully endorsing the contents of the video. Mr. McWilliams, for instance, probably has a confused IMF-type definition of austerity. But I definitely agree with him that policy is driven by the interests of the [...]
Calvin Coolidge had it right, and doesn’t get the proper respect. Under his administration he; cut taxes for all, stopped immigration until unemployment was at an exeptable level, and most important, lowered the national debt. The results; the economy grew, unemployment dropped to around 3%, and he lowered the natioal debt by almost 30%. Pretty good example of effective government that is not used today. We need another Coolidge.
[...] lose (wasn’t that Kissinger’s attitude about the Iran-Iraq war?). Indeed, this is why I put together this matrix, to show that there is an alternative [...]
[...] http://danieljmitchell.wordpress.com/2012/02/26/whats-the-difference-between-a-libertarian-a-supply-… Share this:TwitterRedditFacebookEmailPrintDiggStumbleUponLike this:LikeBe the first to like this post. This entry was posted in Uncategorized. Bookmark the permalink. ← Instapundit » Blog Archive » CALIFORNIA: “THE NINTH CIRCLE OF BUSINESS HELL,” as voted by Chief Executive magazine…. [...]
A good read. And posted on my birthday!
[...] of the problem is that the debate in Europe is a no-win exercise, pitting proponents of higher taxes (which is largely how Europe’s political elite defines [...]
[...] of the problem is that the debate in Europe is a no-win exercise, pitting proponents of higher taxes (which is largely how Europe’s political elite defines [...]
[...] lose (wasn’t that Kissinger’s attitude about the Iran-Iraq war?). Indeed, this is why I put together this matrix, to show that there is an alternative [...]
[...] won’t work. The “growth” vs. “austerity” debate in Europe is really a no-win fight between those who want higher spending vs. those who want higher taxes. The only good answer is to [...]
[...] Higher taxes won’t work. The “growth” vs. “austerity” debate in Europe is really a no-win fight between those who want higher spending vs. those who want higher taxes. The only good answer is to [...]
[...] of the problem is that the debate in Europe is a no-win exercise, pitting proponents of higher taxes (which is largely how Europe’s political elite defines [...]
[...] The mess in Europe has been rather frustrating, largely because almost everybody is on the wrong side. [...]
[...] The mess in Europe has been rather frustrating, largely because almost everybody is on the wrong side. [...]
[...] The mess in Europe has been rather frustrating, largely because almost everybody is on the wrong side. [...]
[...] The mess in Europe has been rather frustrating, largely because almost everybody is on the wrong side. [...]
It shocks me to consider the state of this “hot mess” that evolved from the country where I grew up.
It’s is a depressing mess and it appears there is nothing to be done to tip the scale back to sanity. I’m 53 and looking around for somewhere else to call home.
Our own government has turned against us like a desease destroying its host body.
Myself and family are looking on the horizon for another Statue of Liberty, the nazis are in the streets of America
[...] commented before how the fiscal fight in Europe is a no-win contest between advocates of Keynesian deficit spending (the so-called “growth” camp, if you [...]
[...] commented before how the fiscal fight in Europe is a no-win contest between advocates of Keynesian deficit spending (the so-called “growth” camp, if you [...]
[...] commented before how the fiscal fight in Europe is a no-win contest between advocates of Keynesian deficit spending (the so-called “growth” camp, if you [...]
[...] commented before how the fiscal fight in Europe is a no-win contest between advocates of Keynesian deficit spending (the so-called “growth” camp, if you [...]
[...] Higher taxes won’t work. The “growth” vs. “austerity” debate in Europe is really a no-win fight between those who want higher spending vs. those who want higher taxes. The only good answer is to [...]
[...] The politicians say that this is a “balanced approach,” but this view is misguided, First, as Veronique de Rugy has shown, it generally means lots of new taxes and very little spending restraint. Second, it is based on the IMF view of “austerity,” which mistakenly focuses on the symptom of red ink rather than the underlying disease of too much spending. [...]
[...] The mess in Europe has been rather frustrating, largely because almost everybody is on the wrong side. [...]
[...] The mess in Europe has been rather frustrating, largely because almost everybody is on the wrong side. [...]
[...] created a matrix early last year to illustrate some of the goals and tradeoffs, but it wasn’t [...]
[...] created a matrix early last year to illustrate some of the goals and tradeoffs, but it wasn’t [...]
Oh Dan why after Joe and James did you actually post the repetitive out of date waste of time and partial “repetitive” posts ? You’re so obvious
Serious about input then why include all these archaic posts prior to Reply box? Japan until just very recently was far from Keynesian policy, they now see their mistakes thanks to Big Ben? NO you say to reducing gov spend we are back to levels of 09 and declining who’s the big gov lovers now? And BTW the libertarian way can never be achieved again of small unregulated gov because the wolves and foxes are now watching the chicken coop as proof of our great deregulatory recession after fleecing Americans. Ramble on Dan even if only for confusion and misinformation? And Again you stereotype of supply siders is no stereotype it’s the closest accuracy you have.
[...] created a matrix early last year to illustrate some of the goals and tradeoffs, but it wasn’t [...]
[...] “austerity” crowd at places such as the International Monetary Fund, by contrast, argues that deficits are bad for growth and this leads them to support higher [...]
[...] “austerity” crowd at places such as the International Monetary Fund, by contrast, argues that deficits are bad for growth and this leads them to support higher [...]
[...] telle qu’elle est défendue dans des lieux comme le Fonds Monétaire International, jugent au contraire que les déficits sont mauvais pour la croissance, ce qui conduit à soutenir des impôts plus élevés. Ensuite, vous avez des institutions comme la [...]
[...] Moreover, I think this gives us some insight into why Krugman may actually think he has prevailed. Simply stated, he’s comparing Keynesianism to the IMF/European version of austerity. [...]
[...] Moreover, I think this gives us some insight into why Krugman may actually think he has prevailed. Simply stated, he’s comparing Keynesianism to the IMF/European version of austerity. [...]
[...] Moreover, I think this gives us some insight into why Krugman may actually think he has prevailed. Simply stated, he’s comparing Keynesianism to the IMF/European version of austerity. [...]
[...] what happens if nations adopt the libertarian approach, which means “austerity” is imposed on the government, rather than on [...]
[…] had a chance to condemn these statist policy prescriptions in an appearance on the John Stossel […]
[…] had a chance to condemn these statist policy prescriptions in an appearance on the John Stossel […]
[…] let’s briefly touch on the underlying policy debate. Keynesians such as Krugman assert that there have been too many spending cuts in Europe. The […]