Sunday, July 27, 2008

Editorial on Taxes and the Economy

An unsigned editorial from the NYT, which makes a glorious and often overlooked economic point about the recession we're in. (The good stuff is at the end.)

Yes, the economy is in the toilet. Why? The economy is shrinking, rather than expanding. The value of the dollar is dropping against other world currencies, since the economy is shrinking and the value of the dollar has to do with the value of the overall economy and the faith that government and corporations have in our longer term ability to climb out of the deep hole of our national debt. But it's important to remember that that value determination is two-fold. Some politicians (the Current Occupant and the Republican Nominee) have suggested that what we need to do to get the economy out of the toilet is to lower taxes -- thereby causing people who don't need to pay some money in taxes to use that money to invest and thereby stimulate the economy. However, there's a catch. The government keeps spending money regardless of whether it's coming in or not, so lowering taxes long term might keep the economy from sinking further, but will not convince corporations and other governments that we are going to ever have a healthy national debt.

That's something that's often ignored, but not, at least today, by the editorial board of The New York Times. Economics 101 right? But still worth saying.

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