Saturday , January 20 2018
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Two Points of Pushback Against My Buddies, re: GOP Tax Plan

Summary:
(1) Suppose someone argued, “I don’t think it’s right for Donald Trump to be talking trash to North Korea. He is just setting the US up for a big war that might involve nuclear weapons. In terms of foreign policy, he’s writing checks that the American public doesn’t want to cash. It would be much more responsible for Trump to launch a first strike this week, so that we can have the war right now and suffer the casualties, without foisting the bad consequences onto future citizens.” I think a bunch of you might have been tracking with that critique, up until the last sentence? If so, then do you agree with the large number of free-market economists who say, “Without spending cuts, this tax plan is a scam. Sure, tax cuts are good, but deficit spending is just

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(1) Suppose someone argued, “I don’t think it’s right for Donald Trump to be talking trash to North Korea. He is just setting the US up for a big war that might involve nuclear weapons. In terms of foreign policy, he’s writing checks that the American public doesn’t want to cash. It would be much more responsible for Trump to launch a first strike this week, so that we can have the war right now and suffer the casualties, without foisting the bad consequences onto future citizens.

I think a bunch of you might have been tracking with that critique, up until the last sentence? If so, then do you agree with the large number of free-market economists who say, “Without spending cuts, this tax plan is a scam. Sure, tax cuts are good, but deficit spending is just deferred taxation, as Milton Friedman taught us.” (And I’m not even taking into account supply-side considerations.)

[EDITed to add: I am not mocking people who say the above, and it’s possible I’ve said comparable things during my career. But my current point still stands.]

(2) The effective average tax rate in the US (before the overhaul) is something like 30% (though we can quibble on how to calculate that figure). So for all those people who are complaining that the GOP plan still retains the deductibility of employer-provided health insurance, I don’t really see how this could explain the overall problem with US health care / insurance.

For an analogy, it’s true that a business might have its annual conference in Hawaii rather than Ohio, because of tax deductibility. So that would explain why the business spends $1 million on its conference rather than $700,000. But given that it was spending $1 million, it would be a great conference. It wouldn’t be crappy hotel and food in a freezing location.

So, if everybody thought US health care was awesome but just cost 30% more than it ought to, then I could believe that tweaking the tax code would “solve health care.” But I don’t think that’s really it.

Robert Murphy
Robert Patrick Murphy (born 23 May 1976) is an American economist, consultant and author. He is an economist with the Institute for Energy Research (IER) specializing in climate change and a research fellow with the Independent Institute, He was a senior fellow in business and economic studies at the Pacific Research Institute, and he is an associated scholar at the Ludwig von Mises Institute. In addition to economic subjects, Murphy writes about, and has presented an online video class in, anarcho-capitalism on the Mises Institute website. Murphy also has written in support of Intelligent Design theory and expressed skepticism of biological evolution.

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