Friday, June 24, 2011

Things I wish I would have written first

This. GOP logic on taxes and economic growth (or lack thereof):

Bill Clinton's tax hikes in 1993 pretty clearly caused the 2001 recession, and despite the heroic efforts of Republicans, the hangover from those tax hikes moderated the otherwise exceptional growth rates of the Bush years. I mean, the Bush years between recession and even bigger recession. Which we'll get to later.

So why did the economy grow so fast in the 1990s? No question about that -- it grew because of the Reagan tax cuts of 1981. Now, granted, those tax cuts couldn't prevent a recession in 1990-1991, which was caused by Clinton's tax increases in 1993, but the effects of the Reagan tax cuts kicked back in again around 1994 and resulted in several years of excellent growth.

Now, what about that 1982 tax increase? That's easy: if we never speak about it, then it didn't really happen, and it can't really affect economic growth. ….

If you've understood everything so far, it should be pretty easy to deduce why the economy fell into another recession in late 2007. George W. Bush was term-limited, and the odds were high that Barack Obama would soon be president and usher in an era of unprecedented tax increases. Faced with that inevitability, no wonder the economy collapsed! The Obama tax increases were devastating, and businesses in 2007 were helpless in their wake, rippling backwards through time.

This is undeniable true. However what the writer neglected to mention about the current economic down turn is the “force of will” thesis. I will explain.

As Larry Kudlow put it in 2008, with the economy already starting into its Obama collapse, George Bush was still in the White House and could talk smack to oil prices and lower them by force of will. This puts more money in the pockets of consumers and that was good. Bush is no longer in the White House so oil prices are rising due to supply and demand. Now consumers have to pay more and this is bad.

This is another import factor that gets overlooked.

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