Re: Krugman on the Deflation quagmire; reply to Warren's post

["Niggle, Christopher" <Christopher_Niggle@xxxxxxxxxxxx>]

 Warren: I agree with the Lerner-Keynes-chartalist views on fiscal policy to
a certain extent: one very important consideration in designing a tax system
should be its effect on aggregate demand.  But tax systems also influence
the post-tax income distribution, and there is much historical evidence (and
common sense argument and ethical considerations as well) in support of the
proposition that too much income inequality is bad for society.  Hence,
reducing the progressivity of our tax structure with the kind of tax changes
implemented under the Bush regime is probably a bad thing in spite of the
mild stimulus it might effect with respect to aggregated demand.  And
reductions in tax revenue support the desire of right wing small government
nuts to reduce social services and investment in public capital.

I think Keynes made the same argument many times; the "arbitrary and
excessive inequality" he disapproved of was bad because it reduced aggregate
demand but also for ethical and political reasons.  At a certain point, more
inequality encourages more inequality...which is inconsistent with a humane
and civil society.

Chris

-----Original Message-----
From: Warren Mosler
To: pkt@xxxxxxxxxxxxxxxx
Sent: 5/30/03 10:34 AM
Subject: Re: Krugman on the Deflation quagmire
Importance: Low

AGREE, AND WHILE THEY ARE AT IT, OFFER A NATIONAL
SERVICE JOB TO ANYONE WILLING AND ABLE TO WORK.
AND DON'T 'PAY FOR IT' WITH A TAX INCREASE OR SPENDING
CUT!!!  IF THE POPULATION DOESN'T WANT MORE
PRIVATE GOODS, BUT WANTS TO WORK, LET THEM AT LEAST
PRODUCE PUBLIC GOODS...

ALSO NOTE:

> 	The Bush Administration has also recommended two
> solutions. First, tax cuts
> to the rich, which, as Krugman suggests, is likely
> to be insufficient since it
> provides additional funds to those"least likely to
> spend".

THIS IS ABSOLUTELY TRUE, BUT BEGS THE QUESTION, WHY
TAX SOMEONE IF IT WON'T REDUCE HIS SPENDING?  THE
VERY POINT OF TAXATION IS TO CREATE SELLERS OF REAL
GOODS AND SERVICES, ETC. SO THE AXE SWINGS BOTH WAYS.
TAXING SOMEONE WHO WASN'T GOING TO SPEND THE FUNDS
DOES NOTHING FOR GOVERNMENT OR THE ECONOMY THE SAME AS
CUTTING TAXES FOR SOMEONE WHO WON'T INCREASE SPENDING
DOES THE SAME NOTHING.

WARREN


=====
Warren Mosler, www.mosler.org
c/o James River Capital Corp
5007 Chandler's Wharf, Suite 201/202
Christiansted, USVI  00820
340-719-8813 office phone
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Primary email contact:  mosler@xxxxxxxxxxxxxx

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