China Business Tax Cuts Led to Lower Deficit
Once again we see the Laffer Curve, originated by my friend Arthur Laffer (Tip of the hat, via Ford Scudder). China did a little stimulus last year, but in general China’s policy was towards tighter money and lower taxes, which the Keynesians would predict would lead to low growth, higher inflation, and worsening deficits. Instead China got higher than consensus growth (though not higher than our models were predicting), low inflation, surging tax revenues and plunging deficits. The principles of supply-side economics are not western principles, they’re human principles. When Japan got on the wrong side of the Laffer Curve in the early 90s, they ended up losing two decades.
From the (not normally supply-side) Wall Street Journal news (as opposed to op/ed) team:
“A brief mini stimulus policy of spending on rail and subways as well as business tax breaks helped push growth higher in the second half.
The deficit came in at 1.06 trillion yuan ($174 billion), about 1.86% of gross domestic product last year, according to calculations by The Wall Street Journal based on government data. China had projected a fiscal deficit of 1.2 trillion yuan, or about 2% of gross domestic product, in its budget.
“The central government’s revenue growth began to pick up in the second half of the year as economic growth gradually warmed up and trade conditions improved,” the finance ministry said on its website Thursday.”
Jerry Bowyer is a Forbes contributor, contributing editor of AffluentInvestor.com, and Senior Fellow in Business Economics at The Center for Cultural Leadership.
Jerry has compiled an impressive record as a leading thinker in finance and economics. He worked as an auditor and a tax consultant with Arthur Anderson, as Vice President of the Beechwood Company which is the family office associated with Federated Investors, and has consulted in various privatization efforts for Allegheny County, Pennsylvania. He founded the influential economic think tank, the Allegheny Institute, and has lectured extensively at universities, businesses and civic groups.
Jerry has been a member of three investment committees, among which is Benchmark Financial, Pittsburgh’s largest financial services firm. Jerry had been a regular commentator on Fox Business News and Fox News. He was formerly a CNBC Contributor, has guest-hosted “The Kudlow Report”, and has written for CNBC.com, National Review Online, and The Wall Street Journal, as well as many other publications. He is the author of The Bush Boom and more recently The Free Market Capitalist’s Survival Guide, published by HarperCollins. Jerry is the President of Bowyer Research.
Jerry consulted extensively with the Bush White House on matters pertaining to the recent economic crisis. He has been quoted in the New York Times, The Wall Street Journal, Forbes Magazine, The International Herald Tribune and various local newspapers. He has been a contributing editor of National Review Online, The New York Sun and Townhall Magazine. Jerry has hosted daily radio and TV programs and was one of the founding members of WQED’s On-Q Friday Roundtable. He has guest-hosted the Bill Bennett radio program as well as radio programs in Chicago, Dallas and Los Angeles.
Jerry is the former host of WorldView, a nationally syndicated Sunday-morning political talk show created on the model of Meet The Press. On WorldView, Jerry interviewed distinguished guests including the Vice President, Treasury Secretary, HUD Secretary, former Secretary of Sate Condoleezza Rice, former Presidential Advisor Carl Rove, former Attorney General Edwin Meese and publisher Steve Forbes.
Jerry has taught social ethics at Ottawa Theological Hall, public policy at Saint Vincent’s College, and guest lectured at Carnegie Mellon’s graduate Heinz School of Public Policy. In 1997 Jerry gave the commencement address at his alma mater, Robert Morris University. He was the youngest speaker in the history of the school, and the school received more requests for transcripts of Jerry’s speech than at any other time in its 120-year history.
Jerry lives in Pennsylvania with his wife, Susan, and the youngest three of their seven children.