Flashback 2010, Remembering Christina Romer: Tax Increases and Their Economic Impact

Seeking Alpha ^ | August 10, 2010 | Ian McAbeer

[Son House]

In June of this year, a little known organization called the American Economic Review published a 39 page research article, titled “The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks.” I have quoted from the publication here:

This paper investigates the causes and consequences of changes in the level of taxation in the postwar United States. Our results indicate that tax changes have very large effects on output. Our baseline specification implies that an exogenous tax increase of one percent of GDP lowers real GDP by almost three percent… and that [capital] investment falls sharply in response to exogenous tax increases.

In other words, for every dollar of additional taxes that the government collects, there is approximately $3 of lost economic output for the U.S. economy. Now, this paper and its conclusions might be relatively unconvincing to many if it had been written by a conservative think tank, or by a biased researcher promoting the pro-Republican agenda of lower taxes. However, nothing could be farther from the truth. In fact, this paper was written by Christina Romer and her husband David Romer. In case the name doesn’t ring a bell, please allow me to remind you that Christina Romer is President Obama’s hand-picked Chair of the Council of Economic Advisors (“CEA”). The CEA’s core function is to provide the President with objective analysis and advice on a broad range of economic matters. The CEA is perhaps the most influential economic team in the country because it directs the economic policy of the White House and the President. Christina Romer herself has said that she speaks with the President almost every day.

[Son House]

A tax increase of 1% of GDP lowers real GDP by almost 3%.

Under the new Democrat Economic plan, the earners under $250,000 of the tax cuts would also expire in 1 year. Democrats have no intention of improving the economy, by the measure of their own economist. It's just a slower decline.

The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks.

As the research suggests, for every dollar of additional taxes that the government collects, there is approximately $3 of lost economic output for the U.S. economy.

PDF-The research paper written by Christina Romer and her husband David Romer
http://emlab.berkeley.edu/users/dromer/papers/RomerandRomerAERJune2010.pdf