Skip to comments.Flashback 2010, Remembering Christina Romer: Tax Increases and Their Economic Impact
Posted on 07/09/2012 12:48:04 PM PDT by Son House
In June of this year, a little known organization called the American Economic Review published a 39 page research article, titled The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks. I have quoted from the publication here:
This paper investigates the causes and consequences of changes in the level of taxation in the postwar United States. Our results indicate that tax changes have very large effects on output. Our baseline specification implies that an exogenous tax increase of one percent of GDP lowers real GDP by almost three percent and that [capital] investment falls sharply in response to exogenous tax increases.In other words, for every dollar of additional taxes that the government collects, there is approximately $3 of lost economic output for the U.S. economy. Now, this paper and its conclusions might be relatively unconvincing to many if it had been written by a conservative think tank, or by a biased researcher promoting the pro-Republican agenda of lower taxes. However, nothing could be farther from the truth. In fact, this paper was written by Christina Romer and her husband David Romer. In case the name doesnt ring a bell, please allow me to remind you that Christina Romer is President Obamas hand-picked Chair of the Council of Economic Advisors (CEA). The CEAs core function is to provide the President with objective analysis and advice on a broad range of economic matters. The CEA is perhaps the most influential economic team in the country because it directs the economic policy of the White House and the President. Christina Romer herself has said that she speaks with the President almost every day.
(Excerpt) Read more at seekingalpha.com ...
As the research suggests, for every dollar of additional taxes that the government collects, there is approximately $3 of lost economic output for the U.S. economy.
PDF-The research paper written by Christina Romer and her husband David Romer