“We don’t want to tax all businesses out of business,” Obama said. “But we do think that there’s a role to play for government.”
Don’t want to tax ALL businesses … out of business? Just some of them?
Are you mad? Are you freaking kidding me? Pulling my leg?
Very sad. Very very sad.
The government should be seeking to reduce taxes to make sure businesses grow, and hire, and spend. Mr. President, the entire role of government in business should be to get out of the way, lest you slow down growth, employment, and spending.
The San Francisco Fed does note that after the recovery began ?fiscal policy sharply reversed course? and has since been ?much more contractionary than normal.? But in total ?federal fiscal policy has been a modest headwind to economic growth so far in the recovery, but no more so than usual given the weak pace of growth.?
Surprisingly, despite all the attention federal spending cuts and sequestration have received, our calculations suggest they are not the main contributors to this projected drag. The excess fiscal drag on the horizon comes almost entirely from rising taxes. Specifically, we calculate that nine-tenths of that projected 1 percentage point excess fiscal drag comes from tax revenue rising faster than normal as a share of the economy.
The referenced study is here. And it has some bombshells in it
While our estimates show that fiscal policy has held back the recovery slightly to date, the effect over the next three years looks much bigger. The CBO projects that the federal deficit as a share of GDP will drop 1.4 percentage points per year over the next three years. This projection would ease slightly to 1.2 percentage points per year if sequestration spending cuts were reversed. By contrast, our calculation of the historical-norm deficit decline through 2015 is 0.4 percentage point per year based on the CBO?s output gap projections. This implies that the excess drag from the rapidly shrinking deficit would reduce real GDP growth annually by between 0.8 and 1.0 percentage point, depending on whether sequestration is reversed. Thus, with or without sequestration, fiscal policy is expected to be a much greater drag on economic growth over the next three years than it has been so far.
Put another way, the same genius who doesn’t want to tax ALL businesses out of existence, is actively implementing policies that are causing stagnant non-growth/non-recovery. Go figure.
They emphasize and re-emphasize the point.
Federal fiscal policy has been a modest headwind to economic growth so far during the recovery. This is typical for recovery periods and in line with the historical relationship between the business cycle and fiscal policy. However, CBO projections and our estimate based on the countercyclical history of fiscal policy suggest that federal budget trends will weigh on growth much more severely over the next three years.
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