Saturday, August 4, 2012

An Annoying Inconsitency

You know how there are some things that get repeated often that just bug you.  Well, I wanted to briefly cover one of them here.  I'm hearing two arguments about fiscal policy that to me are entirely inconsistent.

One of them comes from the short that we should raise taxes on some people in order to either pay for more programs or reduce the deficit.  In either case, the argument is some form of the fact that this won't be contractionary because the stuff we spend the money on or the deficit reduction will drive more growth than the reduction in growth from the tax increases.

At the same time, we're told that the states need more money so they can hire more teachers and spend more money on infrastructure.  Presumably, this money is going to come from the Federal government in the form of borrowing or maybe as a use for the increased taxes.

What bugs me about these two arguments is their inconsistency.  Either you are arguing that higher deficits are expansionary, in which case any tax increase is bad, regardless of what the money is used for or you are arguing that more spending is good, regardless of how you pay for it.  If it's the former, then a tax increase is bad no matter what.  If it's the latter then the state spending problem could and should be solved by state tax increases.

Just annoys me that people can make both arguments simultaneously without anyone looking at the relationship between them

1 comment:

  1. There is no relationship because, of course, money is not fungible. The money that is raised from higher taxes is earmarked for reducing the deficit---Obama said so and he's the President, so it must so be. The money that is used to pay for those other things clearly comes from somewhere else. Perhaps this would be more clear to you if the currency raised or borrowed would be coded (perhaps a red color for currency that is borrowed) so that it is easier to track.