Monday, March 14, 2011

Cockroach ideas

From respected economist Mark Thoma:
One cockroach I thought had been wiped out by "facticide" is that tax cuts pay for themselves. But that turned out to be wrong. Prior to the recent Congressional elections this claim was still made by many politicians on the right, and it was largely unchallenged by the press (making me think I should have called the insecticide used to battle bad ideas "facts aside" instead of "facticide"). It wasn't claimed as widely as in the past, so that is progress I guess, but even those who know better began making artful statements that made it sound like tax cuts would still bring more revenue to the Treasury (e.g. statements like tax cuts increase growth, and more growth means more revenue for the government -- essentially, the cockroach mutated in a way that neutralized the attempt to kill it off).

How do you kill a zombie cockroach?
Flaherty in a recent op-ed, "Tax cut vital to Canada’s recovery," writes this, in what Thoma would likely say is zombie mode:
Recent independent studies confirm lower taxes make our economy stronger and create good, long-term jobs for today and tomorrow.
Yet Flaherty has admitted, on the other hand, that employment is not going to grow for years:
But even with an improving outlook for the United States – Canada’s main export market – the economists didn’t tweak their September forecast for a 7.7-per-cent Canadian jobless rate in 2011 and barely cut their 2012 prediction. The rate will average 7 per cent or higher through 2013, compared with 7.6 per cent now, before improving to 6.6 per cent by 2015.

“We anticipate some modest improvement, as the private-sector forecasters do, in unemployment, but we also anticipate resistance to the unemployment rate coming down,’’ Mr. Flaherty told reporters after releasing the new forecasts.
Doesn't seem like he can be having it both ways.

Thought those positions were all worth putting together. Some economic food for thought today.