Friday, July 22, 2011

Milton Friedman was wrong on Bush's tax cuts

Zain Siddiqui sent a link to a radio debate between Paul Samuelson and Daniel McFadden (against) versus Milton Friedman (for) on Bush's tax cuts back in 2003. In the minute 24:20 of the interview, the host asks Friedman:
"Milton Friedman, let me turn to you, are you suggesting, on the contrary, that these tax cuts will lead to capital formation, investment, and therefore, economic growth?"
His response, after noting that he is a libertarian, was:
"Yes I am, indeed and well."
This was eight years ago. Time to take stock and see what happened.  Average rate of real GDP growth from 2001 to 2010 was 1.68 percent.  Below the historical average, even if you eliminated the crisis, in which case it would be 2.08 percent.  And let's not forget that the tax cuts are to a great extent, besides the crisis and the two wars, the cause of higher deficits and debt. Was he wrong? Yes, indeed and well.

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