The public should be skeptical of stories, even ones garbed in sophisticated economic analysis, that subsidies will pay for themselves, writes Jack Mintz in the Financial Post. Below is an excerpt from the article, which can be read in full here.
By Jack Mintz, December 11, 2020
Now that we are back in the era of big government, expect a proliferation of studies advocating a plethora of handouts to buoy the economy. Many industry and social policy groups are lined up to claim their pet subsidy will “pay for itself” with a vast increase in GDP, employment and therefore tax revenues.
These various fairy tales remind me of how supply-side economist Arthur Laffer persuaded Ronald Reagan to cut personal income tax rates in 1981. Laffer argued that lowering tax rates would have such a large effect on work effort and investment that even with the lower rates enough extra revenue would be generated to prevent any deficit from emerging.