This article unwittingly further confirms the crackpot Keynesian economic policy gripping our state leaders. The article itself focuses on Gov. Perdue demanding that state taxpayers receive any refunds they are owed within 30 to 45 days of filing. This would be in contrast to the severe refund delays experienced by taxpayers the last two years.
What I found most interesting, however, was this quote from new Revenue Secretary David Hoyle (formerly a Democratic State Senator).
“It’s important to get this money that’s owed to them back as quickly as they’ve had to pay the state,” Hoyle said. “I think it would be good for the economy to put money back into people’s hands at a time they probably need their refunds more than ever, and we’re going to do that.”
Similarly, a Perdue spokesperson said that “putting the money back in the hands of taxpayers means it will be spent and help boost the state’s economy.”
The underlying theory behind such statements is the simplified notion that economic growth is driven by consumer spending. Some economists refer to this as “boosting aggregate demand.”
I’ve written before about this dangerous and damaging economic fallacy. Growing – or “boosting” – the economy requires productive investment that increases the productive capacity of entrepreneurs. This increased productive capacity is what creates jobs, and is fueled by savings. Focusing on consumer spending as the driver of economic growth is simply wrongheaded. Increased consumer spending is the result of, not the cause of, economic and job growth.
Make no mistake, the government quickly returning money to its rightful owners is a laudable goal. But the comments coming from Perdue’s office and our state’s Revenue Secretary reveal the underlying philosophy guiding their misguided policies. As long as such faulty theories prevail among our state leaders, the recession will be prolonged and job growth will be worse than if a more sensible approach was followed.