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Author: kelbon Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 41634  
Subject: Re: Bargain hunting Date: 11/16/2012 11:09 AM
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Dave,

Yes, economic growth logically would contribute to deficit reductions. However, how to nurture economic growth is the million $ question. Stimulus spending, which some were so opposed to, is one tack; lowering taxes is another, but, lowering taxes would have negative repercussions, both on the deficit, and on the government's ability to pay its liabilities.


There is a fourth way to lower the deficit long term…

—Economic growth stimulated by lower taxes on the middle classes.


Sort of.
The middle class would have more disposable income to buy things. And, the psychological confidence to do so. However, this would have the consequence of reduced revenue, so back to square one unless government spending, on entitlement programs was proportionally slashed.


—Raising taxes on the wealthy

Sort of.
At best, the effect on the economy would initially be negligible. However, as I've already argued, this isn't a reason not to raise taxes on the wealthy which should lead to the perception of a fairer and more cooperative society. (See previous posts).


—With economic growth welfare spending of all stripes would decline.

No. Not really. Not of all stripes.
The "welfare spending" that would decline with an improving economy would be unemployment benefits as the number of those wanting jobs. Also, spending on Medicaid and food stamps would decline some. However, the lion's share of "entitlement spending" wouldn't decline as the number of baby-boomers, and older retirees, that are claiming Social Security benefits and Medicare, won't change. Inevitably, the burden will continue to increase with the "graying of America."

kelbon
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