Wednesday, April 6, 2011

Spurring growth with tax cuts is like burning the house to kill the rats.

This article in today's Globe and Mail has Jim Flaherty referring to his "comfort zone" of low taxes without rationalizing why given that he admits that tax cuts are simply being held by companies.  When the economy is weak, why would people, or corporations just spend the tax cuts on upgrading?  Wouldn't it make more sense to hoard that money until things improve, thereby defeating the very point of stimulus tax cuts?

Former Chief Economist at the World Bank, and economic advisor to Bill Clinton, Joseph Stiglitz outlines in his book "Freefall" just how much so this is the case.  It doesn't make any sense to cut taxes to spur growth logically, and the numbers confirm that.

It should be pretty obvious that tax cuts to spur the economy is akin to burning down the house to kill the rats...or something like that.  That analogy is mine...which is probably why it sucks.  

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