Wednesday, July 26, 2006

Bumper Sticker Economics: Back at the Deficit

In our continuing series, we look at the U.S. Treasury Department's report titled "A Dynamic Analysis of Permanent Extension of the President’s Tax Relief," which may not make for dynamic reading. But the analysis (available here) is instructive.
First, as Dave at First State Politics points out, the report doesn't cater to political fashion:
You can't cut taxes and increase spending and expect the deficit to remain steady solely on the back of the requisite growth in the economy. This is contrary to the opinion of many Republican lawmakers that they can continue to spend, spend, spend and that we will continue to have 4% growth to pay for the spending. It's simply not the case. At some point, you have to make the hard decisions.
What I find interesting about the analysis is what it doesn't cover:
The analysis reveals that the long-run effects of these policies depend crucially on whether they are financed by lower spending or higher taxes in the future and are sensitive to assumptions on underlying parameters.
Left out of the analysis are the economic consequences of continuing on the current course of borrow and spend.

1 Comments:

Blogger jason said...

CNN-- Tour de France winner Floyd Landis fails drug test, his Phonak team says, according to media reports.

The Bush metaphore lives on.

11:06 AM, July 27, 2006  

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