Valls engages in make-belief

So Valls is yet another one who proposes to square the circle:

If one ignores for the moment that there is no empirical evidence at all that companies invest more if they pay lower taxes – quite contrary, at current tax rates in the industrialized world, which have been driven very low, companies save their profits, or use them to buy back shares (driving up the share prices, and therefore CEO compensation) or to speculate.

But even if one takes this assumption at face value. And even if one takes his claim at face value that the French government at different levels can reduce spending without reducing the social services it offers. (which it actually could, if it cut back military spending, for instance, but which it won’t since it plans to cut in health care)

Then what is left is that Valls proposes to increase aggregate demand by at most 30 billion euros, while at the same time guaranteeing a reduction of aggregate demand by 50 billion euros. Unless companies and/or private citizens suddenly go (further) into debt in reaction to reduced tax load, this will lead to economic shrinkage, not growth. Yet I have to read or hear a single journalist question this nonsense.

This entry was posted in belief systems, macroeconomics, neo-liberalism. Bookmark the permalink.

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