Friday, May 07, 2004
Greetings to one and all. "Conventional wisdom" is something that can and sometimes does drive me crazy. One small area in which "conventional wisdom" drives me nuts is the idea that cutting taxes will ALWAYS lead to government deficits. I am a supply-side conservative and from what I know about the doctrines of this school of economic thought is that cutting taxes will, to a point, generate more revenue than before for government because the prospect of lesser punishment by government's taxes will encourage the declaration of income to be taxed. To see a graph and simple explanation of what I'm talking about, Click here.
Another piece of conventional wisdom is the idea that trade deficits are bad for our country's economy. The truth is that trade deficits are good or bad depending on how they are measured and what the money is used for. Victor Canto has a good piece explaining trade deficits and putting them into context. It has become an article of faith in recent years for conservatives to praise trade deficits because the ability to import more goods and services than you export is a sign of economic prosperity. Mr. Canto notes that in the 19th century the U.S. ran trade deficits and emerged as the world's economic superpower at the end of that century. Mr. Canto also notes that China is also running huge trade deficits. Is it not coincidental that talk out of China's government has been of slowing their economy down and their huge international trade deficit? To read Mr. Canto's article Click here.
All of the hand wringing in the press drives me crazy. Michael Cox and Richard Alm in their book Myths of Rich and Poor explain very plainly and clearly why trade deficits shouldn't concern the average citizen, except when they shrink. Cox and Alm point out that the last time the U.S. had a major reduction in our trade deficits, the economy was in the midst of economic recession/depression. Who wants to reduce the trade deficit now?....anyone?....Bueller?.....ANYONE?! The simple fact is that our country is wealthy enough to buy from abroad, if we choose to, goods and services that we otherwise wouldn't have here. What has really cheesed me off about these articles is that they almost exclusively repeat the conventional wisdom which states that trade deficits are BAD and trade surpluses are GOOD. As stated earlier, I think conventional wisdom is 180 degrees off course and that's another thing that irritates me about these stories.
I've ranted on this minutiae long enough.
Random Thought: Hector Berlioz has to have THE coolest sounding name I have ever come across. Becoming a famous and creative composer of music also helps his stock too. *shrug* Just a thought for one and all.
Another piece of conventional wisdom is the idea that trade deficits are bad for our country's economy. The truth is that trade deficits are good or bad depending on how they are measured and what the money is used for. Victor Canto has a good piece explaining trade deficits and putting them into context. It has become an article of faith in recent years for conservatives to praise trade deficits because the ability to import more goods and services than you export is a sign of economic prosperity. Mr. Canto notes that in the 19th century the U.S. ran trade deficits and emerged as the world's economic superpower at the end of that century. Mr. Canto also notes that China is also running huge trade deficits. Is it not coincidental that talk out of China's government has been of slowing their economy down and their huge international trade deficit? To read Mr. Canto's article Click here.
All of the hand wringing in the press drives me crazy. Michael Cox and Richard Alm in their book Myths of Rich and Poor explain very plainly and clearly why trade deficits shouldn't concern the average citizen, except when they shrink. Cox and Alm point out that the last time the U.S. had a major reduction in our trade deficits, the economy was in the midst of economic recession/depression. Who wants to reduce the trade deficit now?....anyone?....Bueller?.....ANYONE?! The simple fact is that our country is wealthy enough to buy from abroad, if we choose to, goods and services that we otherwise wouldn't have here. What has really cheesed me off about these articles is that they almost exclusively repeat the conventional wisdom which states that trade deficits are BAD and trade surpluses are GOOD. As stated earlier, I think conventional wisdom is 180 degrees off course and that's another thing that irritates me about these stories.
I've ranted on this minutiae long enough.
Random Thought: Hector Berlioz has to have THE coolest sounding name I have ever come across. Becoming a famous and creative composer of music also helps his stock too. *shrug* Just a thought for one and all.
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