angry bear: taxes good for growth?

Here's a blog post and interview with Dr. Mike Kimel an Economist who blogs at AngryBear.  Kimel takes the view that taxes can be good for growth. 

The idea that taxes/spending necessarily hurt the economy has already taken hits from high places.  The well-recieved Growing Public by Peter Lindert argued that the studies purporting to show a negative correlation between spending and growth were flawed because they treated all spending equally.  Lindert focussed on 'social spending' and took uber-corrupt states (where taxes would go to buy, say, Phd's for the plaigerist son's of dictators) out of the picture.  Doing this he found no negative correlation and a (very slight) positive correlation.

Lindert, an economist at the mainstream us think tank National Bureau of Economic Research suggests two reasons why taxes and spending would not hinder growth.  The first is that spending, if it is truly social spending, tends to go toward useful things.  Those useful things, such as health care, education and childcare leads to a  healthier and smarter workforce which is good for growth.  The second is that, states that have more taxes and spending tend to structure their state so that (aside from having more taxes and spending) they are in a way more 'incentive friendly'.  Part of this means having higher consumption taxes and lower corporate taxes.

Lindert argues in his book that the conventional economic case against taxes, the 'Deadweight Loss' argument is theoretically valid. What he further argues is that the extent of the 'deadweight loss' may not be as great as imagined and also- as outlined above- he argues that the spending our taxes finance is good for growth.  In the end, the deadweight loss is basically balanced out.

Instead of saying "no" to free market economists, Lidert says "yes, but also this."

Mike Kimel by contrast, (who's book Presimetrics I have NOT read) *seems* to be arguing also that the spending is good for growth.  However, judging from a breif listen to his interview here he seems to also be arguing MUCH unlike Lindert that taxes THEMSELVES can be good for growth.  In other words he is saying NOOOOOOOOOOOOOOOOO!!!! to free market economists. Counterintuitive even for a filthy hippie like me.


Links:
http://www.presimetrics.com/blog/?p=253
http://www.electricpolitics.com/podcast/2011/02/the_truth_about_taxes.html

I say Lindert's book was well recieved because it was positively cited by the popular economics blog http://marginalrevolution.com/ which is far more libertarian than hippie.  The Economist also reviewed it fairly positively, however it argued that the welfare state was quite regressive noting for example the reliance on regressive consumption taxes which hurt the poor disproportionately.  As I recall, Lindert does not argue this, however this should be left to another post.  It's almost morning.