Tuesday, January 15, 2008

US Presidential Canditates on Economics

It is no surprise that the US economy is heading towards recession - when you look at the Economic suggestions from our Democratic and Republican presidential hopefuls you really want to keep selling those dollars.

The best choice seems to be John McCain who at least admits
“The issue of economics is not something I’ve understood as well as I should,” he says.
“I’ve got Greenspan’s book.”
Of course whether having a book by Greenspan will do anything to illumine his economic ignorance is rather a mute point. (Greenspan on Housing Market - Well, it's doing quite strong, but its mainly economic fundamentals, so there's no harm in cutting interest rates even further...)

It's good to see there is a presidential candidate flying the flag for irrational stupidity. This time it is Rudy Giuliani who says that the solution for all America's ills is just a permanent tax cut (presumable for the rich as they usually are in America). Giuliani lays claim to the belief that any permanent tax cut will of course pay for itself.

Alas why did Reagan's tax cuts leave a budget deficit of 5% GDP, and why have Bush's tax cuts created a similar mess? But, of course if we try cutting taxes again - it's bound to work this time!
If only Economics and Politics were so simple:
Tax cuts! - Increase Productivity! increased Demand!, Increase Growth! Budget Surplus!
Why do people associate the Republican party with economic competence when they hold onto such wildly optimistic drivel. There is no empirical evidence tax cuts 'pay for themselves' there is no empirical evidence that cutting taxes increase incentives to work (maybe when they are very high e.g. 60% income tax) But American income taxes are already quite low.
Are American voters so stupid that they fall for it everytime? Tax cuts for the rich is alas not a panacea for all economic ills.

It is hard to find anything else in the Republican party worth mentioning. There mantra seems to be low taxes - Pro business environment and the usual platitudes.

I would be interested in hearing how Republican candidates would deal with the National Debt and budget deficit. (The structural deficit will start deteriorating soon because of demographic factors and ageing population.)

If I can find anything sensible by the Democrat candidates I may mention it next time.

Thanks to Paul Krugman's article for condensing the candidate's ideas

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