which, according to my daughter, is how Hannah Montana expresses surprise at crazy talk. It is something I hear directed at me, alot. Peter Martin alerts us to this quote from Opposition Treasury Spokesperson, Julie Bishop:
Well, it would depend what the package included, but we would be urging the government to include in any stimulus package tax cuts, broad and sweeping tax cuts that will increase the tax base and increase tax revenues.
Whadda you say what?
I guess, we can put this down to a weekend slip up. But let’s just suppose for the moment that it were true and there was a way of cutting taxes and increasing revenues. Now unless the growth in GDP this gets us is so large as to wash this away, macroeconomically, it is the opposite of a stimulus. A stimulus means less tax revenues even if this isn’t the same as cutting taxes. Of course, they are going to be hard pressed to find any economist who thinks that the government has been missing the boat on tax cuts and a climb in revenues all of this time.
[DDET There’s more]
Actually, the bigger gaff is surely this one:
And there’s plenty of evidence to show that the multiplier for a tax cut is greater than that of a direct government spend.
Whadda you say what? Since when? We will be looking for the evidence in support of that.
[Update: Julie Bishop does think tax revenues will rise. OK, tell me again how that stimulates the economy? I am pretty sure the consensus view is that this a recession driven by low aggregate demand rather than a supply contraction. And if it is the latter, why no low-hanging tax reform prior to 2007?]