You won’t believe it, but today at Mises.org I have unqualified praise for two GMU economists, and I illustrate my arguments with a series of curves. (Thanks to Kathy White for creating them.) I may be subject to a boycott in the near future; we’ll see.
Here’s the conclusion:
Most of the pundits — let alone the politicians — debating the tax cut deal have no idea of the impact a payroll tax cut on employees could have on labor supply. Consequently, if the deal goes through, many people may be surprised to see the headline unemployment rate “stubbornly” refuse to fall — or even increase — despite all the “stimulus.”
“What?” you ask in disbelief. “Paul Krugman assures me that cutting payroll taxes on employees will boost spending. How could unemployment possibly go up?”
Read the article.