Debating Economists Can Agree on Bailouts and Taxes
John Taylor ·
August 11, 2010 at 1:59am
PBS Newshour hosted a live TV debate between Mark Zandi and me on the question of whether government interventions helped or hurt the economy. The show highlighted a paper by Alan Blinder and Zandi, about which I posted comments. Several people who watched the show commented on how Zandi agreed with me on two important issues:
- that the on-again off-again bailout policies in 2008 helped bring about the panic that year and
- that holding off on any tax rate increases next year would be a stimulus to economic growth.
Of course, we disagreed about other things.
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Comments:
Jun '10
Re: Debating Economists Can Agree on Bailouts and Taxes
I certainly don't know if TARP was necessary, maybe it was, but I feel comfortable saying that the follow-ups to TARP--the take-overs, Congress' big stimulus grab-bag--lacked focus, lacked immediacy, and had lots of ulterior motives hidden in the fine print. It was deadly to private-sector confidence. There's still no confidence that people in government care enough, or even know the score.
Aug '10
Re: Debating Economists Can Agree on Bailouts and Taxes
I'm pretty sure TARP wasn't necessary.
Re: Debating Economists Can Agree on Bailouts and Taxes
Professor Taylor, I may be stealing a few bases with my question, but please indulge me for a moment. If you and Professor Zandi agree that a tax rate increase would be detrimental this year, wouldn't it be detrimental next year, or the year after? If such an increase retards economic growth, doesn't it follow that it would retard revenue as well? And if it shrinks revenue, wouldn't a tax increase be more of a political exercise than an economic one, i.e., motivated more by a desire to modify behavior or achieve redistributive aims and less by a desire to balance the federal ledger?
Re: Debating Economists Can Agree on Bailouts and Taxes
I have yet to see the debate, but this highlights why I like the Newshour. Often, it does allow both sides to come to some agreements while disagreeing with dignity. Honestly, it's the *only* news/political show I can stand to watch. Listening to people talk over one another, eye roll, blow their stack, whatever, isn't helpful. I guess it can be amusing, but it actually gives me a stomachache. Forgive the aside; I look forward to watching the debate when I'm on my home (faster) computer, and I'm glad you alerted us to it, John.
Re: Debating Economists Can Agree on Bailouts and Taxes
At NR, Daniel Foster has christened the TARPomania you speak of with a handsome image suitable for framing:
May '10
Re: Debating Economists Can Agree on Bailouts and Taxes
Prof. Taylor - To what extent have individuals and businesses already taken into account next year's tax hikes? If the latter have already factored it in, but not as many of the former, are we looking at something like a double-dip recession?
Re: Debating Economists Can Agree on Bailouts and Taxes
It's amazing, really, how little I know about economics, do please feel free to mock me for my total ignorance, but: in a time of high uncertainty for businesses and individuals -- when tax rates are going up, but to an unknown rate; when interest rates no longer even pretend to reflect the actual cost of money; when government regulation continues to spread -- isn't the usual response, the rational response, for businesses and individuals to do....nothing? To spend nothing, invest nothing, hire no one, and wait it out? It seems to me that all of this talk about Stimulus II does precisely the opposite of its intended effect: it smothers any possible green shoots of recovery in uncertainty and risk. And it also seems like that's what TARP did, too: it covered up the true cost of the downturn, so now we're in the dark about how many more banks are about to be shut down. We're at about 110 for the year as it is.
Re: Debating Economists Can Agree on Bailouts and Taxes
Dave Carter, I think we should make the Bush tax cuts pemanent, which means take tax increases off the table, completely. Zandi did not say it in the interview, but my guess is he would like to increase taxes later. So that's a point of disagreement. Also I showed on Economics One a few weeks ago, that the deficit problem is virtually all a spending problem. John
Re: Debating Economists Can Agree on Bailouts and Taxes
I agree with the Ottoman Umpire and Rob Long that uncertainty about what government will do next, whether about tax increases, implementing the complex financial reform and health care bills, or passing yet another wasteful "stimulus" bill is holding business back from making job-creating investments. The uncertainty is causing very slow economic growth with persistently high unemployment. The best way to get the economy moving again is for the government to lay out a clear and credible plan to reduce the deficit without raising taxes by simply slowing the explosive growth of spending.
Re: Debating Economists Can Agree on Bailouts and Taxes
On tax policy, Reihan quotes Worstall: