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View Diary: Krugman is Wrong: The Real Reason to Raise Taxes on the Rich (133 comments)

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  •  Rational Expectations Theory (0+ / 0-)

    Which Krugman also subscribes to as a New Keynesian, holds that when the government talks about raising taxes or cutting the deficit, even in the long term, people adjust their expectations accordingly.

    Consequently, rich people look for ways to move their wealth away from the tax man now, instead of creating demand by spending their money.  As a result, all the talk about raising taxes in fact cuts demand now, just when we need it most.

    •  hmmmm (2+ / 0-)
      Recommended by:
      relentless, rgjdmls

      I'd need to see some data to back that one up right now.

      •  So let's see (0+ / 0-)

        If the government is talking about raising my taxes $20,000 and I rationally expect them to do it, am I going to go out and spend that money buying goods and services that create jobs or am I going to set that money aside to pay my new taxes?

        If the government then uses that $20,000 to pay down the federal debt instead of spending it to increase demand and jobs, where do the new jobs come from?

    •  Sounds like a "trickle down" believer (1+ / 0-)
      Recommended by:

      I'm a fucking retard.

      by Helpless on Sat Nov 26, 2011 at 09:41:25 AM PST

      [ Parent ]

      •  No, I am an Old School Keynesian (0+ / 0-)

        I start with what Keynes wrote in The General Theory of Employment, Interest and Money.  

        He NEVER advocated raising taxes on anyone in the midst of a deep recession.  To do so simply reduces demand when we need to be expanding it.

        To even talk about increasing taxes causes people to change their behavior as they plan ahead.

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