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If High Taxes Led to Growth, the Most-Taxed Countries on Earth Would Be the Richest; Which They Are

By Matthew Yglesias  

"If High Taxes Led to Growth, the Most-Taxed Countries on Earth Would Be the Richest; Which They Are"

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Dave Weigel asked Heritage Brian Reidl if the right-wing’s growing calls for a “spending freeze” aren’t a recipe for macroeconomic disaster and he offered-up a non-responsive response:

This is a controversial stance: an economic downturn is not generally seen by economists as the right time to cut back on government spending. “They’re about as wrong as it’s possible to be,” said Robert Reich, Bill Clinton’s first secretary of labor, when asked about the Republicans’ statements on Monday. Bruce Bartlett, a conservative economist who wrote a book critical of George W. Bush’s spending, could not name many peers who believe that smaller deficits and less spending are the way to combat economic downturns. “It’s a total double-standard,” said Bartlett. “Republicans deficits stimulate, Democratic deficits don’t.”

Brian Riedl, the lead budget analyst for the Heritage Foundation, disagreed that the economics of deficit spending were quite this simple. “Is the assumption that expanding government is good for economic growth?” asked Riedl. “If that worked, France and Germany would have spent the last 25 years as the strongest economies in the world, instead of watching the United States grow at a faster rate.”

Riedl is pretending to not be familiar with the argument that when an economy is in recession an increased budget deficit can lead to increased economic growth. A minority of people don’t believe this is correct, but it’s impossible to believe that a grown man who participates in economic policy debates for a living would actually be unfamiliar with it and present this alternative hypothesis. Apparently, Riedl thinks it’s more important to curry favor with the wingnut caucus on the Hill than to inform the public. And apparently he thinks the best way to do this is to make himself look like an idiot. It’s an interesting statement.

For the record, however, the most-taxed countries on Earth (i.e., the countries where revenue is the highest percent of GDP) are in order:

  1. Denmark
  2. Sweden
  3. Belgium
  4. France
  5. Norway

In terms of per capita GDP these are, respectively, the 4th, 9th, 14th, 15th, and 3rd richest countries on earth while the United States is 17th. Of course in part that’s an exchange rate phenomenon and if you use PPP adjustments rather than market exchange rates, the U.S. looks better. On the other hand, if you peer into the future it seems to me that exchange rate comparisons are likely to make us look even worse in years to come. The high-tax five also do very well on things like the U.N. Human Development index.

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