Republican Economic Theories Fail In The Real World

Liberal Values is often listed as a libertarian-leaning blog, (or Libertarian Democrat at Wikipedia) and that is certainly true in terms of civil liberties, social issues, and opposition to unjust wars. However I (and other left-libertarians) must differ from libertarian views when it comes to economics. This is both due to concern for the influence of unrestricted corporate, as well as government, power, and because of a respect for the realities of a modern market economy. While we would love to be able to get rid of the rules and pay less (or no) taxes, this just is not realistic.

Conservatives and libertarians often argue that tax cuts will pay for themselves to justify lowering taxes. In rare cases where tax rates are high that can occur, but this has no relevance to our current situation. The Hill reports that the Republican-appointed director of the CBO has verified this:

The director of the nonpartisan Congressional Budget Office (CBO), who was appointed by GOP lawmakers earlier this year, said Tuesday that tax cuts don’t pay for themselves.

At a press briefing, a reporter asked Keith Hall about that theory.

“No, the evidence is that tax cuts do not pay for themselves,” Hall said. “And our models that we’re doing, our macroeconomic effects, show that.”

Libertarian and conservative economic theory holds that virtually government spending is bad, and is totally oblivious to the multiplier effect of government spending on the economy. Jay Bookman looked further into the CBO report on Obama’s budget proposal:

Yesterday, under Hall’s leadership, the revamped CBO released its analysis of President Obama’s proposed 2016 budget. Here’s what it had to say:

“CBO estimates that, under the President’s proposals, the nation’s real (inflation-adjusted) gross national product (GNP) would be 0.4 percent higher, on average, during the 2016–2020 period, and 1.7 percent higher during the 2021–2025 period, than under current law. After incorporating the proposals’ macroeconomic feedback into the budget, CBO estimates that deficits under the President’s proposals would be $1.4 trillion smaller during the 2016–2025 period than in CBO’s baseline, which is a projection of the paths that federal revenues and spending would take over the next decade if current laws generally remained unchanged.”

You read that correctly. Under the president’s proposals, which include more spending on social programs and infrastructure as well as slightly higher taxes on the wealthy and corporations, the country would experience significantly higher growth than under current law, and deficits would be lowered by $1.4 trillion over the next decade. Or so says the conservative-run CBO.

If you want a stronger economy and a lower deficit, Democratic economic plans will beat Republican economic ideas.

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5 Comments

  1. 1
    Mike Hatcher says:

    I can support some spending by the government and raising taxes on certain things.  I also can support the end of tax loopholes.  Why not have an aggressive national sales tax, including raising the snot out of taxes on fossil fuels in exchange for drastic reductions, if not total elimination of federal income taxes.  Income tax isn't just about money, it is about the feds snooping into virtually all activity we do.  I'd also support the government spending on some shovel ready wall building on the southern border.  We could hire thousands. Do we need more immigrants? If yes, why not get them from places like Sudan or Myanmar, people who are suffering much worse than those cutting line and depriving other refugees from a place in our country.

  2. 2
    JimZ says:

    "Dynamic scoring" at its best?

  3. 3
    Maurice Ross says:

    This is a brilliant analysis. Thank you.  Supply side, or trickle down economics, which was the centerpiece of the Reagan Presidency, has proven to be an abject failure.

  4. 4
    Anklejive (@Anklejive) says:

    Was there a similar review of the 2016 GOP (Rep. Paul Ryan's) budget? If so, please publish the CBO's findings in the same vein. Thanks.

     

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