Saturday, March 12, 2011

By 2080, Interest On The Debt Could Be 40% Of GDP

See Norquist Is Right, Coburn Is Wrong: Tax Increases Undermine Good Fiscal Policy by Daniel J. Mitchell of Cato. This is shown in a chart. Here is an excerpt:

"Milton Friedman was right when he said that “in the long run, government will spend whatever the tax system will raise, plus as much more as it can get away with.” In other words, if politicians think they can get away with deficits averaging, say, 5 percent of GDP in the long run, then the only impact of higher taxes is an equal amount of additional spending — while still retaining deficits of 5 percent of GDP.

The real-world evidence certainly points in this direction. We've seen "bipartisan budget summits" several times in Washington, and the result is more spending rather than lower deficits. Americans for Tax Reform has a good analysis of what happened after the two big budget summits in 1982 and 1990..."

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