Friday, August 28, 2009
The Irony of Tax Tea Party Protest Signs
It is common to see children carrying signs at tax tea party rallies to protest how government budget deficits are burdening future generations. The irony of this is that the the tax cuts advocated by the conservative Republican politicians they support (without commensurate reductions in government spending) are the primary cause of the dramatic increase in the public debt since 1980.
There also seems to be a failure to understand the basics of macroeconomic policy. Economic declines are typically caused by a decrease in overall spending on newly produced goods and services, which economists call aggregate demand (AD). If consumers and businesses are unwilling or unable to increase spending during a recession or depression, government spending may be the quickest way to increase aggregate demand and reverse the economic decline. Deficit spending during economic downturns is an appropriate response if the goal is to lessen their impact. It is much harder to justify the deficit spending during the prosperous times of the past thirty years.