Thursday, May 20, 2010

Debt crises.

Regarding the austerity vs. growth debate, Nathan Lewis made a good point a couple months back.

After Russia defaulted on its debt in 1998, it bucked conventional economic wisdom by implementing a 13 percent flat tax along with a 1/3 corporation tax rate cut. In response, the average Russian income increased 30 percent per annum in nominal terms from 2001-2007, the best economic expansion in Russia in over a hundred years. Government revenues soared.

It's also worth noting that the only time the U.S. budget has been in surplus in many decades was after the 25 percent capital gains tax rate cut of 1997.

1 comment:

  1. I am from Russia... and you have no clue what tax rate is in Russia. You do not even realize that that average salary in Russia was in 2001 in Moscow $600. So if, as you say, salary grew 30% per annum compounded .... in 2007 it would be $2900... That's simply nonsence. You must be living in a dream world. What happened - it grew 30% in Euro terms so Russians are getting now 900 euros. But in any case you thing that Russia is a good example! Well RE collapsed in Russia in 1998. It reaqlly collapsed from let say 90k to 5k. And than it took 10 years to recover with help of Russian Oil and Nuclear Industry... Do you want smth like that in USA? There will be Great Socialist American Revolution. Meanwhile Americans can not even bvuild 1 nuclear plant.