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1 Gavin Ekins, Time to Shoulder aside Crowding out as an Excuse Not to Do Tax Reform 1 (2017)

handle is hein.taxfoundation/tishcwxf0001 and id is 1 raw text is: FISCAL FACT No. 566 Nov. 2017 The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) non-profit organization. @2017 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Time to Shoulder Aside Crowding Out As an Excuse Not to Do Tax Reform Gavin Ekins Research Economist Key Findings * Government budget deficits absorb a portion of national or global saving, diverting the saving from supporting private investment. This is known as crowding out. * However, saving is flexible both in magnitude and where it is invested. It can grow and move in response to higher borrowing needs and higher returns to saving and investment. * Even relatively large budget deficits are dwarfed by huge levels of global saving. * It takes very little change in interest rates to attract additional world saving to the United States. * Consequently, government budget deficits have only a small effect on private investment. Crowding out per se is of minimal importance. * The source of the deficits does matter. Deficits created by tax relief do less damage to private investment than do deficits created by increases in government spending. * The United States is an open economy, closely integrated with world capital markets. Some economic models wrongly treat the economy as largely closed to international capital flows, overstating the effect of deficits on economic growth, and understating the power of pro-investment, pro-saving tax reforms to boost investment, wages, and employment. Their predictions are off the mark, and hamper Congress's work on tax reform.

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