RE: Tax cuts or public investment?

["Forstater, Mathew" <ForstaterM@xxxxxxxx>]

David - I think the payroll tax cut is also a progressive tax cut--you should
look at the Tax Cut Fact Sheet mentioned by some others on the list:

http://www.cfeps.org/public/PolicyNote2001-1.htm

By the way, I am for increasing spending, especially on the things we need! In
fact I support a public service employment program that would be
deficit-financed, and that would be directed to all the things you mentioned,
from infrastructure revitalization to environmental protection to public health
and other social services. C-FEPS and I am on record on this all over the place,
from publications to the web and various e-mail lists to our petition we were
circulating LONG before anyone else was talking about recession or Japan ten
years ago or tax cuts or whatever.

We are arguing for tax cuts in the context of the current debates. We feel we
really need to loosen the fiscal stance one way or the other to prevent a hard
landing, so if the discussion is about tax cuts we are saying the proposed cuts
are too small, too slow in their phase in, and the additional cuts should be
targeted to lower and middle income groups--which means the payroll tax.

On the party reversal, I have noted this as part of a little "fiscal sociology
of the late 20th century" in 2 or 3 recent papers, one I presented at the
American Association of Law Professors in early Jan, another at the ASSA in Jan,
another at the Easterns a couple weeks ago. I can send you any or all of these
privately if you are interested, or summarize my take on it in an e-mail if you
prefer.

Mat

-----Original Message-----
From: David Gleicher [mailto:104201.2301@xxxxxxxxxxxxxx]
Sent: Monday, March 05, 2001 10:19 AM
To: INTERNET:pkt@xxxxxxxxxxxxxxxx
Cc: David Gleicher; Clifford Poirot
Subject: Tax cuts or public investment?


> modification of the U.S.'s fiscal stance to a budget deficit of 2.5% of
GDP is hardly reason to expect default, if that is what you are implying.
You don't have to be chartalist or a supporter of functional finance, even
a deficit dove position of Eisner or
Heilbroner and Bernstein would support that.<

As one who more or less takes the same position as Eisner on these matters,
I agree with the point made here.  On the other hand, I fail to see the
justification for huge tax cuts as the form of a stimulative fiscal
policy, as I think Matt is advocating.  In the US anyway there are crying
needs for public investment (and therefore savings) in the areas of
health, infrastructure, the environemnt, education, occupational saftety
and so on.   The only tax reductions it seems to me that make sense right
now are increases in the Earned Income Tax Credit program, since these
achieve in an efficient way much needed income redistribution.

On a couple of related notes, did anyone notice Greenspan's clear
statement, at one of the recent Congressional hearings, that there is no
known way to measure the money supply, and therefore monetarism (while
theoretically correct, he hastened to say) cannot actually be practiced by
the Fed.  There is an irony here that the Friedmanite empiricist
epistemology seems to he hoisted on its own petard.  If there is no
meaasurement of the money supply, how can it be the object of 'scientific'
inquiry?  In particular how can one assert a connection between money
supply and inflation when you can't test the relation?

Second, I'm surprised no one has mentioned (or have I missed it) the weird
reversal of the economic stances of the two political parties.  Bush in
particular makes an unapologetic Keynesian argument for his tax cuts, while
the Democrats by and large urge increases in national savings, in the form
of paying down the national debt.  What does this say about the relation of
Truth to Power I wonder?

DG