The Learning Curve

New tricks for an old dog.

I did not comprehend

Last week I watched a ten second video clip of a reporter asking President Obama, “Do you raise taxes in a recession.” President Obama replied, “No, you do not raise taxes in a recession.” I totally misunderstood the context of the question and the answer. Since current events have been so focused on the negotiations regarding raising the debt ceiling and balancing the budget, my thinking was stuck in that context, which distorted the context of the question and the meaning of the answer.

Obviously, in the context of dealing with a recession one does not raise taxes for the simple reason Kenynsian economic theory suggests it is a big mistake to balance the budget in a recession, and experience supports this conclusion.

If the goal is to balance the budget when upper bracket income tax rates are well to the left of the optimum point on the Laffer curve and are at historic lows, of course you raise taxes.

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Written by Tom Fox

07/19/2011 at 10:32 pm

Posted in Politics

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