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View Diary: Progressive taxation: Flashback to 1941 (19 comments)

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  •  Krugman is refering to raising taxes to pay debt (0+ / 0-)

    and or interest. That is not what I have advocated. One of the Romers recently published a paper saying the same.

    The simple reason that its a "wash" is because there is no investment in the economy.

    Fiscal expansion can be done thru monetary policy or stimulus, if monetary policy wont/cant move, then many Keynesian types choose deficit spending to fund direct stimulus.

    And as long as we're in a liquidity trap I anticipate Krugman will continue to advocate stimulating the economy thru deficit spending.

    And include deductions and exemptions for domestic investment in the US economy, in essence keeping the effective rates the same or nearly the same.

    FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Sun Sep 02, 2012 at 12:25:04 PM PDT

    [ Parent ]

    •  Sorry (0+ / 0-)

      The general rule that higher marginal tax rates reduce incentives to produce, work, and investment regardless of why the marginal tax rates are high. He was just using this as an example.

      But again no one is advocating that deficit spending is not good  in a liquidity trap. Don't go into straw man territory.

      Effective tax rates don't matter on the margin, marginal tax rates, what you earn on the NEXT DOLLAR, is what matters.

      I asked you as a general rule, is it better to garner X amount of revenue with lower or higher marginal tax rates, and you said higher.

      Btw , excluding WWII , the current deficits as a share of GDP, are larger than the deficits we ran from 1933-1941 by a considerable margin. Between 1933-1941 , deficts were 4-6 percent of gdp Current deficits are about 9 percent of gdp, and have been in the 9-11 percent range for the last 3 1/2 years.

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