Our Tax Dollars Are Funding Bureaucrats Who Advise Congress that Higher Taxes Increase Prosperity
by Dan MitchellI’ve already written about the terrible work of the Congressional Budget Office. The CBO did an awful job on the stimulus, for instance, repeatedly asserting that diverting money from the private sector to government somehow would create jobs. CBO also was a disaster on Obamacare, claiming that a giant new entitlement program would reduce budget deficits. And the legislative bureaucracy even has argued that higher tax rates boost growth.
That sounds absurd (and it is), but CBO is not the only taxpayer-funded bureaucracy on Capitol Hill producing this kind of nonsensical analysis. The Congressional Reserach Service just published a new report asserting that higher tax rates will boost economic performance. Here’s an excerpt from that CRS publication.
…it is ambiguous whether tax cuts lead to more or less work, saving, and investment. The expiration of the tax cuts would nevertheless reduce the budget deficit, absent other policy changes, which economic theory predicts would have a positive effect on the economy in the long run.
To be fair, CRS doesn’t actually claim higher taxes are good for growth. And neither does CBO. But CRS and CBO both assert that there is no clear evidence that higher taxes hurt growth. Budget deficits, however, supposedly have a very negative impact on economic performance according to these Capitol Hill bureaucrats. More specifically, CRS and CBO believe that government borrowing leads to higher interest rates, and they think that higher interest rates reduce investment. And since investment is a key to long-run growth, this leads them to endorse any policy – including higher taxes – that reduces red ink.
Taking the CRS and CBO analysis to its logical extreme (and neither bureaucracy has stated that there are limits to their methodology), tax rates of 100 percent would be the most effective way of maximizing prosperity.







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