A great example of arguing from theory rather than fact. Is there any robust proof this is true? Not really, next to none. Clinton raised taxes and growth was higher than before he increased taxes. And the post war record of increasing taxes and robust growth suggest something else is going on then dreamt up by Mankiw. Anyway it must be nice to never have to check in with the facts and just read-off from the holy-writ. At this point Pravda was more enlightening…at least they tried to warp the facts to fit the line. Apparently the conservative wing of liberal economics is now
both value and fact free.
Second, the Fed could easily overestimate the economy’s potential growth. In light of the large fiscal imbalance over which Mr. Obama is presiding, it’s a good bet he will end up raising taxes for most Americans in coming years. Higher tax rates mean reduced work incentives and lower potential output. If the Fed fails to account for this change, it could try to promote more growth than the economy can sustain, causing inflation to rise (bold added).