After posting my commentary about President Obama's press conference, I read the Wednesday, February 11th, Wall Street Journal and on the Op Ed page under "Notable & Quotable, Harvard economist Robert Barro was quoted in an interview by the Atlantic. This article was very timely since the professor supports my main contention that tax rate changes will boost aggregate demand. I am quoting the interview that pertains to tax policy as follows:
"Atlantic: And I take it from the Wall Street Journal piece you wrote last week...well, the piece is just specifically about measuring multipliers, but I take it that you are fairly skeptical in general that fiscal policy will boost aggregate demand.
Barro: Right. There's a big difference between tax rate changes and things that look just like throwing money at people. Tax rate changes have actual incentive effects. And we have some experience with those actually working.
Atlantic: What would you say is the best empirical evidence there?
Barro: Well, you know, it worked to expand GDP for example in '63 and'64 with the Kennedy/Johnson cuts. And the Reagan twice in '81 and '83 and then in'86. And then the Bush 2003 tax-cutting program. Those all worked in the sense of promoting economic growth in a short time frame"...
The difficulty with the economic profession is there are too many conflicting "expert" opinions. However, we should pay attention to those that are supported by strong empirical evidence.
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