Magazine article Economic Trends

The Economy in Perspective

Magazine article Economic Trends

The Economy in Perspective

Article excerpt

My dinner with Andre ... The time: a gloomy summer evening. The place: Aux Shuque's, an oyster bar cum bistro.

"Andre, I asked you to meet me because I need your advice. You must have heard about the slow pace of economic activity here and the debates about stimulating growth. I just don't know what to think any more. I remember that you faced a similar situation in Nedlaw when you were the Minister of Finance--what did you do?"

Before speaking, he ordered a plate of oysters Rockefeller and a platter of oysters remoulade for us to share.

"It's simple," he said. "You need a comprehensive plan and you must close your eyes to politics. You have to think beyond today and implement policies that will make sense well into the future."

"Andre, with all this talk about budget deficits, government spending, exchange rates, and deflation, I wouldn't know where to start. Did you use fiscal policy to stimulate Nedlaw's economy? Some of our economists say we shouldn't worry about larger deficits, but others say our government debt is already too big and we face huge future obligations to support our older citizens. What's your opinion?"

My friend became animated. "Look, deficits create jobs and tax cuts create the best jobs because they put money in people's pockets. Naturally, Nedlaw has its sticks-in-the-mud who prattle about deficits as well, but no one pays any attention. We take the benefits of deficits to their logical conclusion: Because deficits create jobs and lowering taxes creates the best jobs, we abolished taxes altogether. Today, the only jobs you can find in Nedlaw are good jobs! Now be a dear fellow and order us some oyster bouillabaisse."

After dispatching the waiter, I asked a question that left no doubt about my naivete. "But without taxes, how can you finance any government operations?"

"Exactly. I was immensely clever in that regard, if I say so myself. You see, around the time that Nedlaw's economic slump began, some people started to worry about the dangers of deflation. So we cranked up the money-printing presses at the same time as we eliminated taxes. When you can print all the money you need for running the government, you don't need taxes, and inflation is just what the doctor ordered for reversing that deflation psychology. …

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