# Raising taxes during a recession. Good idea? **URL:** \ **Category:** Great Debates\ **Created:** [June 27, 2009, 4:48am UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147 "2009-06-27T04:48:03Z")\ **Posts on this page:** 12\ **Page:** 1
**Author:** ![Dog80](https://avatars.discourse-cdn.com/v4/letter/d/6bbea6/32.png) [@Dog80](https://boards.straightdope.com/u/Dog80)\ **Post date:** [June 27, 2009, 4:48am UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/1 "2009-06-27T04:48:03Z")
Country X was in bad economic shape for at least the last decade and now due to the global recession, the government of Country X is desperately strapped for cash, just like any individual or company living there. Investments and economic growth in general have come to a grinding halt, inflation has reached negative numbers and now the danger of stagflation is visible (if it is not already happening). Government’s response? Raise taxes to everything: cars, boats, houses, gasoline, various consumer goods, introduce new tariffs etc. Is this a good idea? What will be the effects in the short and mid term? ---
**Author:** ![Rand\_Rover](https://avatars.discourse-cdn.com/v4/letter/r/db5fbb/32.png) [@Rand\_Rover](https://boards.straightdope.com/u/Rand_Rover)\ **Post date:** [June 27, 2009, 4:49am UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/2 "2009-06-27T04:49:08Z")
There are several long and boring books that would be happy to discuss the pros and cons of this with you. Or look up “Keynes” on wikipedia and off you go. ---
**Author:** ![athelas](https://avatars.discourse-cdn.com/v4/letter/a/5e9695/32.png) [@athelas](https://boards.straightdope.com/u/athelas)\ **Post date:** [June 27, 2009, 3:24pm UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/3 "2009-06-27T15:24:17Z")
Bad idea. If your country is in recession, fiscal expansion is the order of the day, to replace lost demand until the economy recovers. This can take the form of tax cuts (if you’re a libertarian) or greater spending (if you’re a statist). One of the reasons that the Great Depression was prolonged was because in the mid '30s FDR saw unemployment start falling, and figured hey, we’re out of the woods, let’s raise taxes to balance the budget. Then the economy tanked again. I’m curious why you put stagflation in there, though. Stagflation and recession are not synonymous. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [June 27, 2009, 6:57pm UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/4 "2009-06-27T18:57:37Z")
The programs that will possibly fix the system are expensive. They have to be funded. We can not just spend,spend spend. Is it logical to wait until it is over to find ways to pay for it? Pay now and pay later until we get the budget back in shape. ---
**Author:** ![Squink](https://avatars.discourse-cdn.com/v4/letter/s/b5e925/32.png) [@Squink](https://boards.straightdope.com/u/Squink)\ **Post date:** [June 27, 2009, 7:06pm UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/5 "2009-06-27T19:06:55Z")
> [@gonzomax](#): > > We can not just spend,spend spend. That was disproved by the Bush administration. We _can_ just spend, spend spend, so long as we don’t mind hobbling our government, government government in the future, future future. Some even see this consequence as a _positive_ effect of fiscal irresponsibility. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [June 27, 2009, 7:16pm UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/6 "2009-06-27T19:16:13Z")
If the Senate passes the cap and trade bill that the house passed yesterday, I guess we’ll find out soon. It’s a very large tax aimed squarely at the manufacturing sector, and the Democrats want to pass it just as the manufacturing sector is reeling from the worst recession since the great depression. This is a very bad idea. ---
**Author:** ![Squink](https://avatars.discourse-cdn.com/v4/letter/s/b5e925/32.png) [@Squink](https://boards.straightdope.com/u/Squink)\ **Post date:** [June 27, 2009, 8:31pm UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/7 "2009-06-27T20:31:01Z")
> [@Sam\_Stone](#): > > the Democrats want to pass it just as the manufacturing sector is reeling from the worst recession since the great depression Maybe Bush and friends should have dealt with the problem before courting a big recession? Maybe if we’d had cap and trade instead of Iraq, the economy wouldn’t suck quite so badly today. ---
**Author:** ![Lantern](https://avatars.discourse-cdn.com/v4/letter/l/d26b3c/32.png) [@Lantern](https://boards.straightdope.com/u/Lantern)\ **Post date:** [June 27, 2009, 8:32pm UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/8 "2009-06-27T20:32:13Z")
In answer to the OP, neither raising taxes nor cutting government spending is a good idea during a recession. And if the OP is some kind of veiled attack on cap-and-trade it misses the mark. First of all it will take some time for the bill to be actually passed and implemented by which the recession is likely to be over. Possibly it could take 2-3 years for the administrative details to be sorted out. Secondly the bill will start off by giving most of the permits for free minimizing the early costs for businesses. At a more conceptual level cap-and-trade works by changing marginal incentives not raising revenue. Even a revenue-neutral version of cap-and-trade would help reduce emissions. The bottom line is that the recession is not at all a valid reason to delay cap-and-trade. Indeed you could argue that passing cap-and-trade will clarify the rules of the game and reduce business uncertainty which is good for investment. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [June 27, 2009, 9:43pm UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/9 "2009-06-27T21:43:22Z")
It’s OK to raise taxes if you raise spending more. The mistake some people make is thinking they have to cut taxes & raise spending both. And cap & trade is about economic incentives. Nothing wrong with creating some of those _while_ spending to stimulate the economy. ---
**Author:** ![athelas](https://avatars.discourse-cdn.com/v4/letter/a/5e9695/32.png) [@athelas](https://boards.straightdope.com/u/athelas)\ **Post date:** [June 27, 2009, 10:20pm UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/10 "2009-06-27T22:20:07Z")
The nice(?) thing about cap and trade, related to the OP, is that the vast majority of the permits were granted to favored constituencies for [free](http://www.forbes.com/2009/06/08/waxman-markey-bill-carbon-emission-opinions-contributors-cap-and-trade.html). Thus instead of auctioning off permits to generate money, we have simply distributed green-tinged pork to lobbying firms and industries. > [@](#): > > In May, during the markup of the Waxman-Markey climate change bill, congressmen gave away valuable emissions permits at no cost to favored industries. Though these handouts have temporarily bought political support for cap-and-trade–which is effectively an energy rationing system–Americans will see little, if any, environmental or economic return. This is a very bad deal for the American taxpayer, but in the short term it avoids the contractionary effect of a tax hike, which would damage the economy further during this recession. The real damage to the economy is in the long-term, when this bill raises energy prices and retards economic growth (that is if you _believe_ the claim that we’re going to cut carbon to 17% of 2005 levels by midcentury). ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [June 27, 2009, 10:26pm UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/11 "2009-06-27T22:26:07Z")
> [@Sam\_Stone](#): > > If the Senate passes the cap and trade bill that the house passed yesterday, I guess we’ll find out soon. It’s a very large tax aimed squarely at the manufacturing sector, and the Democrats want to pass it just as the manufacturing sector is reeling from the worst recession since the great depression. > > This is a very bad idea. The Bush and Reagan administrations had a mantra"deficits don’t matter’. Now they matter? The fiscal stupidity of those admins ,leaves them no room to bitch. ---
**Author:** ![Dog80](https://avatars.discourse-cdn.com/v4/letter/d/6bbea6/32.png) [@Dog80](https://boards.straightdope.com/u/Dog80)\ **Post date:** [June 27, 2009, 11:45pm UTC](https://boards.straightdope.com/t/raising-taxes-during-a-recession-good-idea/501147/12 "2009-06-27T23:45:00Z")
No, country X is Greece actually. What is cap and trade?