Monday, July 22, 2013

Detroit. An Economics Lesson on How Not to Do It.

Over at The Market Ticker, Karl Denninger has a primer on how not to run a government.

If you increase tax rates then you decrease economic surplus.  This inevitably slows economic expansion; it mathematically must.

If you make political promises that can only be met through increased tax rates, now or in the future, you begin the process of slitting your own throat.  That outcome is inevitable when you agree to political promises that have escalating expenses over time as pensions, medical benefits, salary "step" increases, bond issues that have a payment schedule longer than the useful life of the asset bought and similar.

This is a must read article.

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