From: fierro@uts.amdahl.com (Doug Fierro)
Newsgroups: talk.politics.misc,alt.activism,misc.headlines,sci.econ
Subject: Re: Derailing the Reagan Revolution, part 2: Seven more years?
Date: 21 Aug 92 00:11:42 GMT
Organization: Amdahl Corporation, Sunnyvale CA

In article <1992Aug20.192934.29839@vexcel.com> dean@vexcel.com (dean alaska) writes:
>In article <1992Aug20.021305.3644@desire.wright.edu> demon@desire.wright.edu (Stupendous Man) writes:
>>
>>	Nothing seems able to make politicians understand that higher tax rates
>>do not automatically translate into more money.
>>
>>Brett                                                      
>
>Maybe the fact that lower taxes during Reagan's wonderful 7 years of
>economic growth led to the highest deficits we've had till then has
>something to do with it.
>
>For those who want to unilaterally blame congress (I blame both), please
>tell me which appropriations bills were passed over Reagan's veto.
>
>-- 
>
>		dingo in boulder	(dean@vexcel.com)


  The deficit grew even more under Bush, after taxes were raised!

  A bit on tax and spend theories from a past posting here:

  The proponents of higher taxes accept as a matter of faith that deficits
  will fall if taxes are raised.  But recent historical experience at both
  the state and the federal levels demonstrates convincingly that there is
  no such iron law of politics.  Indeed, a sizable body of statistical and
  anecdotal evidence shows that trying to reduce deficits by increasing
  taxes is an exercise in futility:  Lawmakers invariably respond to higher
  taxes principally by raising spending by an amound about equal to the
  additional revenue, thereby leaving the deficit fundamentally unchanged.

  The description of this effect is often called the "tax-and-spend
  hypothesis."  Many years ago Milton Friedman stated the point this way:
  "You can't reduce the deficit with higher taxes.  Political rule number
  one is: government spends what government recieves plus as much as it can
  get away with."  Not surprisingly, the Washington establishment dismisses
  Friedman's "rule."

  Nonetheless, several studies have verified the tax-and-spend hypothesis.
  In 1986 economist Paul Blackley published a study in 'Public Finance
  Quarterly' that examined the relationship between federal taxes and
  deficits during the period 1929 to 1982.  Blackley found that revenue
  increases led to spending increases, not to smaller deficits.  A
  subsequent study by Neela Manage and Michael Marlow, formerly with the
  U.S. Treasury Department, supported this finding.  The authors found
  statistical evidence of "one-way causality from tax receipts to spending,
  suggesting that tax increases result in higher spending levels - and
  possibly larger deficits."

  Perhaps most controversial was a 1987 paper published by the Republican
  members of the Joint Economic Committee (later disavowed by Democrats),
  which examined federal revenues and deficits from 1947 to 1986.  The
  authors JEC staff members Richard Vedder, Lowell Galloway, and Chris
  Frenze - concluded that each dollar of new taxes had triggered $1.58 in
  new spending.  In other words, the deficit has tended to *rise*, not
  fall, after a tax hike.

"Liscense to Spend", _Reason_ magazine, October 1990 by Stephen Moore.
-----------------------------------

  Doug
-- 
                                                     Doug Fierro
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