Bruce goes on to look at the empirical evidence — namely that spending went down after the Clinton tax increases and up after the Bush tax cuts — and concludes that STB is a “crackpot theory.” True! But what makes it even more crackpotty is that basic economic principles, of the kind that Republicans are endlessly lecturing the rest of us about, predict the same thing. If you raise taxes to pay for government programs, you’re essentially making them expensive. Conversely, if you cut taxes, you’re making government spending cheaper. So what does Econ 101 say happens when you reduce the price of something? Answer: demand for it goes up.
Cutting taxes makes government spending less expensive for taxpayers, which makes them want more of it. And politicians, obliging creatures that they are, are eager to give the people what they want. Result: lots of spending and lots of deficits.If you want to reduce spending, the best way to do it is to raise taxes so that registered voters actually have to pay for the services they get. I don’t have a cute name for this theory, but it’s true nonetheless. Even for Republicans.Nassim Nicholas Taleb thinks the nation state is fated to disappear over the next couple of decades, to be replaced by “city-states and statelings” that rely on a gold standard and can manage their finances properly. Matt Yglesias is skeptical:
Maybe so. And yet it seems to me that people have been predicting the nation-state’s demise for a long time and it seems like a very robust structure. If anything the trend I see toward greater adherence to a strict interpretation of what a nation-state is supposed to be. Belgium splitting in into two properly “national” states seems much more plausible than Los Angeles emerging as a quasi-sovereign entity.Yeah, I don’t think LA is quite destined for national greatness yet. Ditto for the idea that our current recession spells some kind of permanent change in “consumerism” and spending habits. I know this kind of thing sounds cool, but it’s really unlikely that even a big global recession is going to fundamentally change either the course of human history or the current state of the art in human nature.Our problems today may loom large, but they’re also quite solvable. True, the solutions involve a fair amount of nonheroic drudgery, and that’s not very much fun to write about, but it’s a whole lot more likely to improve actual human lives. Noses to the grindstone, folks.