Tuesday, July 25, 2006

Another day, another oversimplification of an economic issue by the media

If you wonder why the general public doesn't have a strong understanding of basic economic principles, you need to look no further than this article on MSNBC.com about a recent report from the US Treasury Department about the economic impacts of President Bush's tax cuts. The thesis of the article is essentially that making President Bush's tax cuts permanent would boost the economy, as long as other taxes weren't increased to offset the loss in revenue.

Wow! That sounds like Bush's method of economic stimulus might actually have the intended result.

The problem is, as the actual report from the Treasury Department points out and the MSNBC article merely skims over, is that positive economic growth assumes DECREASED government spending to offset the lost revenues from tax cuts. In other words, the economic growth is mitigated when you cut taxs AND spend more money.

My friends who are actual fiscal conservatives, and not just cheerleaders for President Bush, have been pulling their hair out about the President's budgetary policy. The one and only veto President Bush has to his name during his 5 years in office is the recent Stem Cell Research Funding Bill that he vetoed about a week ago. He hasn't vetoed a single spending bill that has come across his desk since he started sitting at it.

So while tax cuts do help the economy in a very minimal way, the minimal gain is completely offset when the government does nothing to curb spending while decreasing taxes. The net result is a larger federal budget deficit, which pretty much every single economist in the world who isn't on the Bush Administration's take would agree is a huge economic hindrance.

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