12/11/2011

When Republicans make Keynesian arguments

This is from Investors Business Daily. The problem here is that they basically accept the Keynesian concept of saving, meaning that it is the equivalent of not being spent. But saved money isn't hidden in a hole in the backyard. If you leave your money in the bank, that money is lent out or used to buy bonds. If the person with the savings account doesn't spend it, someone else spends it.

While adding $250 billion to the deficit, according to Alex Brill of the American Enterprise Institute, extending the payroll tax holiday would provide up to $1,500 per family.

But, Brill notes, researchers Matt Shapiro and Joel Slemrod found that among recipients of tax rebates in 2001, only 22% spent the rebate, while the rest saved it or used it to pay off debt. A similar study of 2008 tax rebate recipients found only 20% spent it. . . .

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