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-- Brad Delong

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Saturday, July 16, 2011

More American Exceptionalism: Government Revenues

That was the title of Steve Roth's post yesterday.

Go read it.

The only thing I would add is that U.S. GDP growth started slowing around the early 80's, when the "ahem" countries started to overtake us.  So - it's only slow GDP growth that has kept us from falling even farther -  oooh, the hazards of ratio based analysis.

OTOH, the graph suggests a correlation that Steve hints at:  countries with higher sustained growth have also had generally higher revenues/GDP.

My take is that the free market is NOT necessarily more effective, efficient, nor better in any way than a market that is 1) sensibly regulated and 2) distorted by the dead-weight loss of taxation..

My take is supported by both U.S. history and cross-country comparisons.

Makes ya wonder . . .


6 comments:

The Arthurian said...

re the "govt revenue as a % of GDP" at Asymptosis, "it's only slow GDP growth that has kept us from falling even farther - oooh"

Oooh, indeed.

Were we to unwind current events back to the 1990s, or before, we would find the problem of slow GDP growth attributed to excessive growth of government; and the evidence was to show federal spending relative to GDP.

Circular logic at best.

Bruce Wilder said...

Regarding that "dead-weight loss" to taxation, seen from our present perspective, the wisdom of heavily taxing economic rents suggests itself, does it not?

High top marginal income tax rates and high marginal corporate income tax rates could discourage "effort", as the Right suggests; or, they could just keep the greed of rentiers and corporate viziers from getting out of hand.

Jazzbumpa said...

Art -

The thing is - govt spending/gdp has been trending DOWN since the 70's, and the growth of govt spending - at all levels has been less than in the golden age. Blows that whole idea.

http://jazzbumpa.blogspot.com/2011/01/government-spending-and-great.html

Bruce

I said "dead weight loss" with my tongue tucked high in my cheek.

Re: high marginal rates, Mike Kimel has shown repeatedly that the right is wrong. Green suppression, better resource allocation, rent reduction and encouraging investment all result from higher marginal rates.

Thanx!
JzB

The Arthurian said...

Jazz,
The thing is - govt spending/gdp has been trending DOWN since the 70's, and the growth of govt spending - at all levels has been less than in the golden age. Blows that whole idea.

Depends who you ask, I guess. Mid-1990s, the Wall Street Journal and the Investors Business Daily both showed graphs of federal spending relative to GDP, showed it rising, claimed it was evidence of excessive government growth, and suggested it was the source of our troubles. (I have the clippings somewhere...)

Perot still says that today, even though his graph shows it to be false...
Well, the PerotCharts site is down, apparently, but I do have this.

It doesn't matter that it's not true. It matters that it gets printed in WSJ and IBD and talked up continuously on TV.

WASF
Art

Jazzbumpa said...

Right Wingers lie - the truth is not on their side. The WSJ and IBD are both right wing rags, and always have been.

It is very hard indeed for the truth to win against determined liars.

Alas,

JzB

The Arthurian said...

Maybe instead of this --

"The only thing I would add is that U.S. GDP growth started slowing around the early 80's, when the "ahem" countries started to overtake us."

-- it was like this:

U.S. GDP growth started slowing in the early 1980s, when tight monetary and other policy changes minimized inflation by restricting spending and growth (which *let* the 'ahem' countries make gains).

My way, the problem comes back to the stagflation problem of the '70s, which was solved by suppressing growth. Which then made the supply-side favoritism necessary. (I hesitate to use the word 'necessary' because I don't think it was necessary at all. But given the earlier mistake (suppressing growth) it was the most reasonable response that incompetent economists could come up with.)