NY Post - By MICHAEL BARONE - March 7, 2009
'ANIMAL spirits," said John Maynard Keynes, are the essential spring of capitalism. We depend on the animal spirits of investors, high earners and entrepreneurs for a growing economy.
Keynes knew whereof he spoke. People don't just respond in linear quantum jumps to the incentives and disincentives they perceive around them. They perk up when their animal spirits are aroused, and they slump down into inertia when they are not.
President Obama's tax plans, announced in his budget message last week, threaten to depress the animal spirits that we depend on for economic recovery. I reach this conclusion on the basis of my past errors.
In 1993, I (like many economic conservatives) predicted that the Clinton tax increase, to a 39.6 percent marginal tax rate on high earners, would squelch economic growth. It didn't, or at least not so much as to prevent what became, later in the decade, robust growth. (continues...)
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