Posts filed under “Taxes and Policy”

Open Thread: No Free Lunch?

In today’s WSJ, Art Laffer critiques the stimulus package:

"In this world of ours, those resources going to the
rebate recipients don’t come from the Tooth Fairy. They have to come
from workers and producers. If the resources come from workers and
producers who thereby receive less for their work than they otherwise
would have received, won’t they in turn spend less? Of course they’ll
spend less, and the people who now supply them with less will also
spend less, and so on down the line."

Now, I have no real love of this stimulus package — why $300? Why not $3,000 or $3,000,000? — however, since it was written, by the father of supply side economics, I knew there had to be something amusing to be found in it. Art Laffer did not disappoint:

As my former colleague and friend Milton Friedman
liked to say, "There’s no such thing as a free lunch," and this rebate
is exactly what he meant. The net effect is that the reduction in
demand from those who pay the real resources will be exactly the same
size as the increase in demand from the rebate recipients. It’s sad but
true. Income effects always net to zero in a closed system."

A rather unintentional howler. You see, one of the arguments the Supply-Siders have put forth is that tax cuts pay for themselves. (This has since been thoroughly debunked).

That’s rather ironic: The latest bunch of free-lunchers, are being called out as, well, a bunch of free-lunchers, by the original free-luncher! Apparently, its only a free lunch if it involves tax cuts, not if it involves spending.

Why do these folks keep forgetting: TANSTAAFL!


Tax cuts, stimulus spending — any of it a free lunch?

What say ye?


That ‘Stimulus’ Nonsense
WSJ, February 13, 2008; Page A27

Category: Economy, Politics, Taxes and Policy

Mortgage Bond Ratings Change: “Too little, too late.”

Category: Credit, Derivatives, Taxes and Policy

Cramer: “Ethanol is a fuel that doesn’t work”

Category: Energy, Taxes and Policy

Financial Sector: More Damage to Come

Category: Derivatives, Real Estate, Taxes and Policy, Valuation

Monoline Rescue Plan Round Up

Category: Credit, Derivatives, Taxes and Policy

How to Stop the Downturn

Category: Economy, Politics, Taxes and Policy

Bernanke: Fed Must Avoid Greenspan Errors

Category: Federal Reserve, Financial Press, Politics, Taxes and Policy

Are Bankers Incompetent Morons?

Category: Corporate Management, Finance, Financial Press, Taxes and Policy

Google Gets Its Elections On!

Category: Politics, Taxes and Policy, Web/Tech

Read it here first: Incentives Distorting Home Prices

Category: Credit, Real Estate, Taxes and Policy