On the other hand, the LHTD wasn’t too WGCEish on R4 this morning.
Ironman
Is there necessarily symmetry in the equation? The report says a 1% cut in taxes leads to an immediate GDP increase of 0.6%; it did not say an increase in tax would cause a 0.6% decrease in GDP. At present is it likely to be greater than that?
Rather grotesquely, Richard Murphy and a mate at Compass built an entire argument around IMF figures that showed of all factors involved in a focal contraction, a reduction in gov’t capital expenditure had the greatest negative impact on GDP. They decided this proved that an increase in the same would have a huge expansionary impact on GDP. Well Capital expenditure doesn’t work like that.
Tim adds: Yes, he does note the symmetry in the paper.
A more reasonable criticism would be that this is the marginal effect at around this sort of level of taxation. I’m sure if taxation were at 5% of GDP (or 95% of GDP) that the effects would be very different.
Ironman
I was skim-reading; I should go back and have another look, taking my time! And yes, the effects at different levels of taxation would differ. As to symmetry: aah Tim, I really would like to have the time to look at this. Thinking again, my logic (for what that’s worth) suggests the difference may be timing; a negative impact occurs more quickly and is a more short-term phenomenon. I would be grateful for more suggested reading on this.
However, the immediate short term now involves a barbecue. A real barbecue hosted by friends who lived in Sutebol for 20 years. So not “cooking outside”.
On the other hand, the LHTD wasn’t too WGCEish on R4 this morning.
Is there necessarily symmetry in the equation? The report says a 1% cut in taxes leads to an immediate GDP increase of 0.6%; it did not say an increase in tax would cause a 0.6% decrease in GDP. At present is it likely to be greater than that?
Rather grotesquely, Richard Murphy and a mate at Compass built an entire argument around IMF figures that showed of all factors involved in a focal contraction, a reduction in gov’t capital expenditure had the greatest negative impact on GDP. They decided this proved that an increase in the same would have a huge expansionary impact on GDP. Well Capital expenditure doesn’t work like that.
Tim adds: Yes, he does note the symmetry in the paper.
A more reasonable criticism would be that this is the marginal effect at around this sort of level of taxation. I’m sure if taxation were at 5% of GDP (or 95% of GDP) that the effects would be very different.
I was skim-reading; I should go back and have another look, taking my time! And yes, the effects at different levels of taxation would differ. As to symmetry: aah Tim, I really would like to have the time to look at this. Thinking again, my logic (for what that’s worth) suggests the difference may be timing; a negative impact occurs more quickly and is a more short-term phenomenon. I would be grateful for more suggested reading on this.
However, the immediate short term now involves a barbecue. A real barbecue hosted by friends who lived in Sutebol for 20 years. So not “cooking outside”.