Wednesday, November 17, 2010

Economic Growth Can Make the Medicine Easier to Take

One of the things that amaze me is the similarity of the political and social reactions to the Great Depression and the Great Recession. FDR ran his first campaign with balancing the federal budget as one of his goals. He did this because the depression had eroded tax revenues and put the budget in deficit under Hoover just as it has done under Obama. Some of the programs that were introduced after FDR took office helped the economy to recover but the increased the federal budget deficit. Taxes were increased and spending was cut in response and we had a double dip depression. We know much more about how the economy works today but the politics are not much different. Lets hope that we get lucky.

One of the suggestions in this article linked above is that we simplify the tax code. The basic problem with the tax code is that politicians make it more complex every year because it is one of the ways that they can milk campaign contributions out of the beneficiaries from the changes that they make. As long as politicians are dependent upon large contributions to run campaigns, we will never simplify the tax code and we will never spend government funds in a way that maximizes the public good.

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