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Opinion: Both Parties Prefer Fairy Tales to Truth on Economy

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Ideology is a dangerous thing. For people who believe in an ideology deeply, plain to see facts don't hold a candle to fundamental tenets. You can see this in all forms of ideology, cultural, religious or political.

There are enough of these persistent myths that you could write a small library of books about them, but one of the most dangerous is this idea that tax cuts magically pay for themselves. Many on the right believe this fairy tale with a great deal of zeal. It would be amazing if it were true, and in perfect political propagandistic form... those that benefit from widespread belief in this myth repeat it over and over and over, knowing that there is a segment of the population that will eat it up.

But it doesn't hold up to scrutiny when you actually look back at how it has played out in the past. The latest illustration comes from a report from the Library of Congress' Congressional Research Service, which found very little to connect lower tax rates to higher economic growth:

"Advocates of lower tax rates argue that reduced rates would increase economic growth, increase saving and investment, and boost  productivity (increase the economic pie)...

There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top  of the income distribution."

I had a fantastic conversation related to this a few days ago, with an entrepreneur who's startup I am likely to be doing some work with. As a business owner, he said he'd like to see lower taxes, but wasn't under the illusion that they magically paid for themselves by huge economic growth spikes following them. He went on to talk about how the tax cuts during the Reagan years were so successful because of how they solved the issue of a severe lack of investment capital - something that isn't even close to the case today.

In fact, the world market is awash in cheap cash that is looking for something to invest in. What is sorely needed are investments that have value, and unmet and growing demand. Cutting taxes on the wealthy solves none of this. What it would do, as the study mentioned above states, is put more capital into the hands of those who already have the most, and  it in the mean time it make the debt and deficit issues that are facing the next few generations even more unfair, selfish and hard to tackle.

The Democrats have their own fairy tales. Most relevant to this conversation being the idea that we can have a skyrocketing retired population, keep Social Security and Medicare spending roughly as is and balance the budget without huge tax increases on the middle class like you see in the tax rates in Europe. Both sides want to have their cake and eat it too, and are going out of their way to make the only people who actually end up bearing the costs be future generations, most of whom aren't even born yet.

There is nothing inherent to the liberal political ideology that says you must weave lie filled fairy tales to justify spending more than you tax, or the conservative political ideology that says weaving tall tales so you can get away with cutting taxes more than you cut spending is acceptable.

Our economy crashed largely because of a systemic disease of short-term profit chasing, regardless of the long-term risk of collapse it created. The same is happening in government now, only the crash will come in a couple decades when the short-term, greed driven, lack of planning on the part of cut averse Democrats and tax averse Republicans leads to a crisis on par with what we've seen in Greece and other countries in Europe with a similar head-in-the-sand unwillingness to stop spending more than they tax over long periods of time.

If you're liberal and don't want to see entitlement programs cut much, then at least be honest and admit that that means you're for politically impossible tax increases on the middle class. And if you're a conservative, and don't want to see taxes go up at all, then it's time you are honest with what that means - drastic cuts to Social Security, Medicare and the military. Anything else is just more of the same propagandistic, short-term thinking that got us into the fiscal and economic mess our country is in now.