The low-tax Republicans such as Grover Norquist are going to hate this story. The New York Times reported April 3 that there is no economic evidence that higher taxes slow Economic growth, and no evidence that lowering tax rates improves the economy.
Over the last 30 years, economists have undertaken hundreds of studies to determine whether taxes hurt the economy. So far, they've turned up little to convict taxes of the charge. After reviewing the literature on the topic in 1993, two economists, William Easterly of New York University and Sergio Rebelo of Northwestern, concluded in a joint paper that "the evidence that tax rates matter for growth is disturbingly fragile."
A leading tax specialist today, Joel B. Slemrod of the University of Michigan, would agree. He notes that in the 20th century, a rising tax burden in the United States and other developed countries went hand in hand with rising prosperity.
So the tax cuts are not helping the economy (Well, Doh!) and the unrestrained federal borrowing to finance Bush's federal deficit (pays for tax cuts, war, and unrestrained Republican pork spending) is beginning to require higher interest rates to prevent inflation.
Either inflation, or its preventitive medicine, higher interest rates, are going to slow the economy down. It's not a question of whether or not - it's just a matter of how soon.
My advice? Don't buy any high priced real estate or stocks you expect to sell to someone else for more money soon. Go look up "Greater Fool Theory" in investment literature. A fool today buys unrealistically high priced items because the price has been going up regularly and they expect to sell it for more to some greater fool tomorrow.
The prices are going to stop going up soon, as the supply of "Greater Fools" dries up.
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