Wednesday, August 15, 2012

GDP as impacted by Cuts in Government and Taxes

Last July (2011) I did a blog addressing the Washington Gridlock of the moment which was at that time characterized by Republicans who threatened to let government slide into insolvency unless they got an agreement to cut taxes and the deficit.  Since economic studies and history both demonstrate pretty conclusively that cutting taxes and the size of government reduces GDP and increases joblessness, I predicted that if the Republican's succeeded we would see a rise in joblessness and a drop in GDP, and I promised to revisit the issue one year later to see if I was right.  Here is a link to that blog:

http://motrvoter.blogspot.com/2011/07/tax-cuts-and-creating-jobs.html

Well, in the end the Republicans backed off after the Bond markets threatened to downgrade the credit rating of the US and Congress kicked all the fiscal issues on down the road (which they have done a couple more times since then).  So, I am revisiting the issue as promised, but really have nothing to say since the situation is essentially unchanged.  Republicans are still convinced against the overwhelming evidence of economic studies and history that the cut and cut path will lead to prosperity.  In fact Mitt Romney just named the King of cut and cut economics as his Vice Presidential running mate.

So I guess I will promise to revisit the issue if at some point the Republican's get their way and start hacking away at taxes and the size of government.  I am hoping that doesn't happen since the last time the Republican's were running the show my business got hammered in the collapse of 2007-2008.

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