More on the Impact of Obama's Tax Incrases
In order to estimate the impact of tax increases on GDP, the Chair of Obama Council of Economic Advisers, Christian Romer with her husband David, an economics professor at UC Berkley conducted a study published in the latest issue of the American Economic Review. This academic journal is well respected and perhaps the world's leading publication for academic economic work.
In the paper, "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks" concluded that every dollar of tax increases reduced economic activity by three (a multiplier effect). The key findings of the paper are"The behavior of output following these more exogenous changes indicates that tax increases are highly contractionary. The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes." Translating from academic economic speak to the language of the Vice President, the results are big f&#@ing deal.
I wonder how this squares with upcoming tax increases. Maybe this time is different?
- The Professor