Monday, November 14, 2016

Would you rather the government spend your money or you spend your money?

Two economists looking at the same information will typically draw two different conclusions. The best example of this observation is the diametrically opposite view by economists on tax cuts.  The economists are vehemently split between tax cuts - that never work to boost the economy - to tax cuts that are a large boost to the economy - and finally, of course, tax cuts that only help the rich, which was the Clinton view. 

The economic professors that I listened too at the University of Kansas argued that economics is a science. Yet, with more than 100 years of tax data on the books, there is no clear understanding on the impact of tax cuts on economic growth.  The economists defend their science on the basis there are no parallel worlds to scientifically compare the results of tax cut policies. I admit that is a problem.

According to my examination, there are simply to many other variables that prevent isolating the tax cut variable to determine its singular impact on the economy.

I have a simpler view on tax cuts. Lower them immediately. Why? Because I have more confidence in my ability to invest my money into the economy than I have confidence that the federal government can make those investment decisions for me. Further, my purchasing decisions send an economic signal to manufacturers on what to produce. The more tax money the government has to spend the more obscure the signals become. 

A tax cut also sends a signal to the federal government to do more with less money just like the rest of us.


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