Sunday, November 11, 2012

The Built in Keynes

Cato has an interesting new article in which they point out that the Congressional Budget Office (CBO) has a built in bias towards Keynesian economics.  The CBO has repeatedly assumed that government spending increases GDP, recently claiming that higher tax rates will lead to improved growth by reducing the deficit.  Given that there aren't a whole lot of examples of actual situations where increasing tax rates led to increased growth (and by "not a whole lot" I mean "none"), this isn't a particularly convincing argument.  The Cato article links to a lot of reading on Keynesian economics and on the CBO's slavish (their word, not mine) devotion to Keynes.

Their point, other than providing a reading list for those interested in economics and the CBO, is that Republicans may not wish to spend a lot of time using CBO numbers to justify their arguments for spending restraint and pro-growth tax rates.

You can read more here.

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