It’s the Tax Code, Stupid: Niall Ferguson Solves Our Economic Mess

Don’t blame the lamestream media for this one. When it comes to our protracted economic stagnation, there is ultimately one place to point the finger: It’s those pesky mainstream economists.

That’s the conclusion of Niall Ferguson, history professor at Harvard and author of The Ascent of Money: A Financial History of the World. Ferguson makes his point in the first installment of a new animated series of “Op-Vids” from The Daily Beast. “What is an Op-Vid,” writes The Daily Beast on Vimeo? “Opinion, without the pundits yelling. Handmade animation, without the caricatures. Essays without the text. Complex topics, without the boring.” Without the boring what? Complexity?

Ferguson makes some curious claims. He admits that stimulus spending has worked up to a point: It helped avoid another Great Depression. But it didn’t create a sustained recovery. Why? Because there wasn’t enough of it? No. Because it leaks. In a global economy, Ferguson argues, you would need chaos theory to understand where the stimulus actually ends up. Even more curiously, Ferguson argues that rising income inequality in America “limits the effectiveness of Keynesian policies, because they need average households to boost their spending.” (So you can forget about hiring teachers, firefighters or construction workers; that wouldn’t help “average” households spend more.)

Having thus defeated Keynesianism, Ferguson moves on to offer a solution: Simplify the tax code. Never mind the shortfall in aggregate demand for goods and services. Never mind that corporations–sitting on $2 trillion in uninvested cash reserves–have maintained near-record profits despite the shortfall by cutting production and laying off workers. Simplify the tax code, says Ferguson, and American companies will hire more American workers. Problem solved.

As a footnote, it’s worth pointing out that in early 2009 Ferguson was involved in a very public debate with Princeton economist Paul Krugman over the effectiveness of fiscal expansion. Ferguson argued that government borrowing would damage the economy by driving up interest rates. Nearly three years later, interest rates have remained very low. Looking back on the debate, Krugman said of Ferguson, “He doesn’t understand Macroeconomics 101.”

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Comments (6)
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  • Robert says:

    Having kids in college, it’s refreshing to hear a professor not spouting the Keynesian / Krugman dogma. It has been plain to see that it does not work.

  • Constantine says:

    What a tool. Tax simplification only helps the super wealthy, who are already making massive profits but not creating jobs.

    The simple fact is that large corporations control the vast amount of wealth and have found ways to squeeze the most out of the fewest amount of workers, and will continue to do so as long as they can get away with it. It has absolutely nothing to do with taxes.

  • TJ68LA says:

    What’s stupid is to talk about “the government printing money”. If our democratic government really controlled the currency and created it as needed to expand the economy, the government wouldn’t be drowning in debt.

    This pompous tool is going right along with the mainstream media and economists by hiding the real way money is created: private banks lending it into existence via Fractional Reserve Banking. That monetary base that was tripled? All created as debt, it all needs to be paid back +interest with nothing to provide for real economic growth and full employment.

    I wish one of these “experts” would tell me how when you have a monetary system in which every dollar in circulation was created as debt, that there is any other outcome for an expanding economy but for consumers, businesses and governments to be crushed by the bankers’ dictatorship of debt.

  • Nick says:

    End the double taxation of savings. So he thinks that taxing capital gains and dividends at half the rate of labor isn’t enough. Wants it to go to zero. How the hell is that NOT going to make the rich richer and leave the average person with more of the tax burden?

  • Betsy C says:

    Niall Ferguson maybe a professor but on the other hand is a idiot. Government better stop selling any land to foreigners pure craziness!!

  • Phil Smith says:

    Niall Ferguson needs to be in front of congress everyday!!!

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