Tax Rebates…

Not so good–Bruce Bartlett
clipped from online.wsj.com

In short, there is virtually no empirical evidence that tax rebates are an effective response to economic slowdowns. The increased personal saving doesn’t help the economy because the federal budget deficit, which can be thought of as negative saving, offsets all of it in the aggregate. The main benefit of a tax rebate would seem to be political — giving politicians a way of appearing to be doing something about the nation’s economic problems that is superficially plausible.

A new rebate probably won’t do much harm. But anyone who thinks it will prevent a recession — if one is actually in the pipeline, which is not at all certain — is dreaming. It’s an insult to Keynes even to call a tax rebate Keynesian economics. It should be called “feel good economics” because its only real effect is to make politicians feel good about themselves and buy re-election with the public purse.

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Published in: on January 19, 2008 at 12:21 pm  Leave a Comment  

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