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> there is huge political opposition to counter-cyclical fiscal policy. There is huge political opposition to raising taxes and cutting spending during expansi

> there is huge political opposition to counter-cyclical fiscal policy. There is huge political opposition to raising taxes and cutting spending during expansions, yes. However there is huge political support for cutting taxes and increasing spending during contractions.

bdavisx 9y ago
Not totally during the 2008 recession, there was support for cutting taxes, but not increasing spending. "Austerity"
- jacquesm 9y ago
  Cutting taxes more or less automatically results in increased spending.
  - pja 9y ago
    Not if the tax cut is used to pay down debt, or is "saved" by buying government issued securities. Neither of these result in more economic activity. Sounds an awful lot like the post 2008 environment, no?
    - gozur88 9y ago
      That's not really true. If you maintain the same level of spending but cut taxes, you're going to get money going into the economy. When those government issued securities are bought, for instance, there's someone on the other end of that transaction that now has money. The real problem with the 2008 recession is monetary stimulus doesn't really work.
  - zbyte64 9y ago
    As long as you don't cut services along with those taxes.
gozur88 9y ago
This is the real problem with fractional reserve systems. In theory they could be used to damp out the business cycle. In real democracies voters always want low taxes and high spending irrespective of the state of the economy.
- vanderZwan 9y ago
  > In real democracies voters always want low taxes Would they have to always want that though? I mean, I believe a lot of things can be made more efficient by economies of scale, and in some cases avoiding perverse incentives of for-profit motives (the stories I keep reading about the worst of the American prisons come to mind). In other words: that some systems work best when handled by the government. So I have no trouble believing there are situations where paying more taxes gives me the best value for money in terms of increasing personal happiness, because they would be spent on improving those systems. I'm not sure if there is any government out there currently that I trust that much, but it's sounds hypothetically possible to me.
  - gozur88 9y ago
    >the stories I keep reading about the worst of the American prisons come to mind That's a misconception. State run prisons are no better. Regardless, it's not that people don't want government to provide services. They want government services and they want low taxes.

bdavisx 9y ago

Not totally during the 2008 recession, there was support for cutting taxes, but not increasing spending. "Austerity"

jacquesm 9y ago
Cutting taxes more or less automatically results in increased spending.
- pja 9y ago
  Not if the tax cut is used to pay down debt, or is "saved" by buying government issued securities. Neither of these result in more economic activity. Sounds an awful lot like the post 2008 environment, no?
  - gozur88 9y ago
    That's not really true. If you maintain the same level of spending but cut taxes, you're going to get money going into the economy. When those government issued securities are bought, for instance, there's someone on the other end of that transaction that now has money. The real problem with the 2008 recession is monetary stimulus doesn't really work.
- zbyte64 9y ago
  As long as you don't cut services along with those taxes.

gozur88 9y ago

This is the real problem with fractional reserve systems. In theory they could be used to damp out the business cycle. In real democracies voters always want low taxes and high spending irrespective of the state of the economy.

vanderZwan 9y ago
> In real democracies voters always want low taxes Would they have to always want that though? I mean, I believe a lot of things can be made more efficient by economies of scale, and in some cases avoiding perverse incentives of for-profit motives (the stories I keep reading about the worst of the American prisons come to mind). In other words: that some systems work best when handled by the government. So I have no trouble believing there are situations where paying more taxes gives me the best value for money in terms of increasing personal happiness, because they would be spent on improving those systems. I'm not sure if there is any government out there currently that I trust that much, but it's sounds hypothetically possible to me.
- gozur88 9y ago
  >the stories I keep reading about the worst of the American prisons come to mind That's a misconception. State run prisons are no better. Regardless, it's not that people don't want government to provide services. They want government services and they want low taxes.