Another Chart For You... 'Taxes No Barrier To Growth In !990s'

[WillyT]

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...

The Speaker also repeats the Republican shibboleth that raising taxes is the enemy of growth. That’s what they said in 1993 when President Clinton and a Democratic Congress—with no Republican votes—enacted a tax increase on top earners. As the chart shows, job creation and economic growth were significantly stronger in the recovery following the Clinton tax increase than they were following the 2001 Bush tax cut. And the Clinton policies produced a balanced budget.



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Link: http://www.offthechartsblog.org/bad-economics-and-distortions-of-1990-budget-agreement-hold-deficit-reduction-hostage/

:kick:

[Igel]

1. Bad logic.

I don't like it whether it's branded with a (D) or an (R).

How's this for a model: Taxes over a specific amount inhibit growth. That amount is 15%. (Why 15%? It's a nice number.)

Now, imagine what growth would have been like *without* the tax increase?

Or we could look at say that it's the difference between a slow recovery from recession and robust post-recession growth. (We don't like that. It denies omnipotence to the president.)

Or we could say that the result of the tax increase was to reduce the deficit--and by reducing the deficit, which is a huge burden on lending, enough capital was freed to sustain a period of robust growth. (Deficit = bad. So what about a $1.3 trillion deficit? Ah. We don't like that.)

Or we could point out that the leading economic indicators in 2000 were really sucky: There was the NASDAQ debacle and a stock-market "correction". In other words, the "growth" represents a lot of things, including a tech bubble, one that was induced by having a lot of cheap credit because the deficit was reduced. (At least that lets some deficits off the hook.)

You're generalizing from a single instance, and positing no really good mechanism that actually accounts for more than a random selection of other instances. High school geometry should have taught you better.

We must make the theory as simple as possible. But we must not make it simpler than possible.

[bbinacan]

2. Valid points. n/t