Nobel laureate criticizes Bush tax cuts

... as being not enough. Edward Prescott, who was the cowinner of the 2004 Nobel Prize in economics, shows how higher tax rates hurts the economy by reducing “market time,” that is, useful, productive time a person would put to work on his specialized area rather than something that he is less good at. (He has an op-ed piece in the Wall Street Journal.) This is called a “tax wedge.” The graduated tax system is especially harmful because of the diminishing returns. If additional work only earns me 50 cents on the dollar after tax, for example, I would need to work a lot more hours to make the money necessary to hire someone (with after-tax money) to repair my house. I would then be discouraged from making the best use of my “market time” and do the repair myself, at which I am not as good as a contractor. The tax system therefore results in an inefficient allocation of resources in the economy.

And the Leftists still want central planning and control of everything!