Tuesday, September 9, 2008
"Rhetoric about tax cuts and what segment of society should get them is a predictable part of every presidential campaign. ... True long-term reductions don't exist for society as a whole. In fact, the total tax bite--federal, state and local--now stands at one of the highest levels in decades, despite the ostensible rollbacks of the Reagan and Bush years. ... The late, great free-market economist Milton Friedman once asked: 'When is a tax cut not a tax cut?' His answer: 'When the so-called tax cut is accompanied by a larger rise in government spending that in prices.' ... The Kennedy, Reagan and more recent Bush tax cuts were all accompanied by a larger rise in federal spending than in prices. The underlying reason they were only so-called gets back to what we might call Friedman's Law: 'The real cost of government,' he wrote, 'is measured by what the government spends, not by the receipts, labeled taxes. The goods and services it buys are not avaliable for other use.' ... 'Suppose,' Friedman argues, 'government spends $400 billion and raises $350 billion in funds labeled taxes. Who do you suppose pays for the $50 billion difference? The tooth fairy? Hardly. You do.' ... Until our elected offiicals grapple with the spending side of the ledger, talk of 'tax cuts' is just newspeak. ... When taxing and borrowing aren't enough, the [Fed] simply can print money", Gene Epstein (GE) at Barron's, 25 August 2008.
I agree with GE and Uncle Miltie who said this about 30 years ago. There are no tax cuts. The "stimulus" that some people think comes from Keynesian deficit spending is only an artifact of GDP measurement with does not adequately consider capital consumption.