Normative Narratives

Economic Outlook: Obama Finds an Unlikely Partner in Budget Negotiations


Hello everyone, busy day for me (and the start of a busy finals week), this is gonna be a short update, and I may even miss some days between now and next Wednesday. I’d love to keep my Cal Ripken Jr. type streak of consecutive blogs going, we’ll have to see what happens.

I have highlighted many times that almost all evidence suggests that top tax rates have no long run effect on economic growth. It seems that in an attempt to avoid the negative results of the “Fiscal Cliff”, and set America on a more economically sustainable path, many business leaders are beginning to openly support tax increases.

This is not that surprising, as a recession from the “Fiscal Cliff” would greatly affect consumer confidence and disposable income, hurting corporate profits. Still, it is nice to see the G.O.P.s stance against higher taxes publicly challenged by their own constituents, it really gives you an idea of how absurd their views are.

Notice how no groups which represent those in poverty are coming out and saying slash entitlement spending? This is because these people need the money; the economic and social consequences of these cuts would be huge. Also, cutting entitlement spending would not do nearly as much to reduce the deficit as raising taxes on the nations wealthiest, so it is a bridge to nowhere so to speak. These programs can be made to run more efficiently, and should for their long run sustainability, but this is a long term goal that should not be allowed to muddy up the fiscal talks (and arguably should be put off until we’ve fully recovered from the recession).

I do not really understand why businesses would desire entitlement reform. Theoretically, any entitlement provided for by the government is one that a private business does not have to provide–saving the business money.

Of course businesses do not want to pay higher taxes, but now that it is all but inevitable, it is nice to see some business leaders admitting that higher taxes are not the end of the world. Whether its what Obama calls “economic patriotism”, or just an attempt to avoid a recession that would hurt consumers and producers alike, it is a step towards avoiding the looming “Fiscal Cliff”.


3 thoughts on “Economic Outlook: Obama Finds an Unlikely Partner in Budget Negotiations

  1. When you say you don’t know why businesses would desire entitlement spending, what kind of business do you mean? Corporate titans who have the ear of our leaders, or the owner of a deli?


  2. Because entitlement spending reform means that theoretically the government would provide less coverage. In this case, businesses would have to make up the difference by providing the coverage once provided for by the government.

    This is in response to big businesses, most small business owners do not provide benefits for their employees, and if they do it is because they are in a high skill (and therefore higher profit) industry.

    Either way, entitlement reform means costs shifting from the government to business owners.


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