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View Diary: Cutting Government Creates Jobs Like Cutting Taxes Increases Revenue (2 comments)

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  •  Deficit = Revenue - Spending (0+ / 0-)
    Reagan cut taxes: huge deficits resulted.  Clinton raised taxes, the deficits went away.  Bush cut taxes, we went back to huge deficits.

    What happened to spending during those times? Seriously, I want to know. I'm not drawing any conclusion right now (in fact I agree that Bush tax cuts reduced revenue and Clinton's tax increases increased revenue), but the fact that you're only telling us what happened with half of the equation and making it out to be the whole picture causes me to have doubts.

    In 1937 the United States learned this lesson, succumbing to deficit cutting which choked off the recovery from the depression.

    In 1937, unemployment dropped to its lowest thanks to the SCOTUS striking down NIRA and AAA, but then in 1938 it shot back up.

    What had happened recently? The Wagner Act and minimum wage law passed!

    The Depression was started by the Fed choking off the money supply after having grossly inflated it. They shouldn't have inflated, but after inflating, the best option wasn't to deflate, but to stabilize. Then the Smoot-Hawley Tariff Act prolonged it, then Hoover raised spending a whopping 5% points of GNP, then the Fed choked off the money supply even more, then Hoover signed the largest tax increase in history (at the time). Then FDR signed NIRA and AAA, then created Social Security, then signed the minimum wage and Wagner Act, and all throughout that time, FDR increased taxes.

    Then we had WWII, and of course that lowered the unemployment rate by sending 11 million men overseas. That's not economic prosperity. We weren't out of the Depression until 1945, when our troops came home, spending was cut and the private sector was allowed to function again.

    On the other hand, the "stimulus" boosted the economy, held off a depression and created millions of jobs --

    $787 billion divided by 3.7 million = over $200,000 per job. And that analysis ignores the broken window fallacy on which you rely. The $787 billion didn't come from the tooth fairy, or Santa Claus, or the Easter bunny, or under a mattress. It came from the credit markets, the borrowing of which prevented individuals from investing based on economic calculations.

    Austerity leads to a worse situation immediately, but better later. In contrast, deficit spending leads to a better situation immediately, but worse later. If you only look at the short run effects, you're effectively looking at someone on a caffeine high and ignoring the caffeine low. That makes stupid decisions individually, and disaster when done with policy.

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