Why can't we all just get along (on economic policy)?

The latest video (above) from Dan Mitchell of the Cato Institute reiterates the points made in a video that we posted and discussed back on January 15 of last year, when President Obama was still President-elect Obama and the market had yet to make its March lows, let alone recover.

As Dan Mitchell says in this video, and as he explained in the previous video from January 2009, government stimulus does not work. He takes pains to point out that this fact about the uselessness (and actual harmfulness) of government stimulus holds true whether the so-called stimulus is enacted by Republicans or Democrats (for that matter, it holds true for Greens, Libertarians, bipartisan coalitions, or any other party or un-party, in any country and in any decade).

What actually works to stimulate economic development (and this has been proven over and over in actual historical experience throughout the past century) are lower tax rates on marginal income, and lower levels of growth in government spending (at least keep it below the growth in the economy). While real reductions in government spending are desirable, we are trying to be pragmatic here: we simply ask for lower levels of growth in that spending, which goes up every year and probably always will!

It is important to emphasize lower tax rates, because (as we explained in this previous post) lower tax rates lead to greater economic activity and growth and ultimately then to higher tax receipts (charging a lower percentage but on a larger amount of profits).

This truth should not be a partisan dispute, any more than the law of gravity should be considered the exclusive province of Republicans or Democrats.

What social policies to pursue with the expanded revenues can be a partisan issue -- let the parties argue over that all they want. They can argue over how much of the increased revenue should go to defense spending, or whether taxpayer dollars should be funneled to something called the National Endowment for the Arts. With all the time that they save by not having to argue over stimulus packages, politicians could argue about these other issues all day long.

What mystifies us is that members of both parties continue to act as though government stimulus somehow helps the economy. Everyone should simply agree that it never has and it never will, and move on to discussing and debating other issues.

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For later posts dealing with this same subject, see also: