Tuesday, January 6, 2009

Kudlow on the economy

Does it make sense to open the neo-Keynesian floodgates if we're already at or near the bottom?
President-elect Obama said today that we should expect trillion dollar budget deficits for the next few years. But do we really need this unbelievable increase in the size and scope of government? Art Laffer is very gloomy about big-government spending and borrowing. He believes deficits of this magnitude and a large increase in the government share of GDP are liens on future tax hikes that will slow the economy's potential to grow.
It was Milton Friedman years ago who taught us that the real tax burden on the economy is best measured as the government spending share of GDP. That measure has been falling for over 20 years, until President Bush’s second term. Now Obama’s plan will ratchet this tax burden much higher.
My point? We don't need all this. Lower tax rates for large and small businesses along with easier money and lower gasoline prices will get us on the right track to increase the economy’s potential to prosper.
I think Kudlow is too optimistic about the prospects of a recovery in the short term, but I agree that Obama's mega-stimulus talk is the wrong way to go. It won't work.

The bright side? If any Democrat ever tries to lecture me about deficits again . . .

1 comment:

  1. Well, the longest post-war recession was around 16 months. Double that to a certifiably insane 32 months, and it ends in a year and a half. Anybody think the money'll be spent by then?