I was surprised to read that “White House economists believe that taxes have little effect on growth .” Just a few days ago I received the June 2010 issue of the American Economic Review, the flagship journal of academic economics. The current issue contains an article by CEA Chair Christina Romer and her husband David Romer on the macroeconomic effects of tax changes. Their paper examines “all major postwar tax policy actions” and concludes that “tax increases are highly contractionary.” For emphasis, the authors add that this finding is both “strongly significant” and “highly robust.”
Could it be that the White House economic team is suffering a bit of cognitive dissonance?
E. Frank Stephenson
Department of Economics