Sunday, June 12, 2011

How to Grow GDP by 5% Per Year

link here to article

Everyone has been looking for ways to perform two contradictory acts in order to restore economic growth and cut US budget deficits. This editorial summarizes the solution coming from the Gopher State and its former governor Tim Pawlenty.

Pawlenty claims that if we got rid of three taxes, that are primarily paid by the wealthiest Americans, the capital gains tax, the tax on stock dividends and the estate tax, our problems would be solved.

Someone with half a brain might ask how these tax cuts which would reduce federal tax revenues by over $4 trillion, would reduce budget deficits. Pawlenty then becomes Ronald Reagan and sprinkles us with voodoo economics. He claims that "they would unleash the creative energy of American's businesses, families and individuals". That is, American Exceptionalism would come to the rescue. The current administration has kept our creative energy bottled up, and he would unleash it by cutting taxes even further than George Bush (which led to huge budget deficits). The economy would grow faster than it has ever grown over an extended period (5%). Therefore, his plan would create jobs and INCREASE tax revenue by CUTTING taxes. That, of course, is the voodoo economics plan that turned Ronald Reagan into a conservative icon. It did not matter that US budget deficits under Reagan and Bush grew more than under any presidencies in US history.

Its understandable why voodoo economics would appeal to the those who would benefit from cutting taxes on wealth. What's extraordinary about America is that millions of Americans who have zero wealth find the appeal to American Exceptionalism to be irresistible. The Wall Street Journal and many in the media tell them that bedtime story on a regular basis. They realize that lies that are repeated regularly become the truth. Especially when they are big lies.

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