“You don’t raise taxes in a recession”
Romney repeated that familiar idea in the Oct. 3 debate, suggesting that Obama once said so as well. Here (in this previous post) is how assholes show this to be wrong, or at best “conventional wisdom” in the bad sense: an oft-repeated saying that is dubious or at best true in narrow circumstances. (Unless of course you think truth is just what sounds good on TV. Which would open an entirely different can of worms.)
The idea, again, is that, even if you raise taxes, people moved by status comparisons will still work hard to beat the next guy. Status motivations will be especially reliable when taxes are already low and being raised only slightly over longer time frames (e.g., 5% over five years). There won’t be strong competing concerns for (small) marginal gains or losses.
While it might not be ideal to raise taxes in the thick of a financial crisis, before some measure of general confidence is restored, it may quickly become the wise course as emergency conditions blow over, in order to calm fears about longer-term budgets. We just saw how quickly deficits became hot politics (partly because the issue is a political winner, and partly because the influence of Keynesian stimulus remains hard to measure with great confidence, and so easy to politicize). So *if* indeed tax hikes won’t dramatically weaken incentives to work (given the power of status concerns), tax hikes will make good sense in order to create present assurances of sound longer-term fiscal prospects. (That might also bolster support for more aggressive short-term stimulus, and a quicker road back to normal times).
Thus status-conscious assholes, when suitably managed, can be a force for good.
