CHAPTER 11

How to Get Out of Expansive Policies

“I’ll break away, yes I’m on my way”

—Journey

There is nothing easier to do than to print money.

It feels great at first. Lord Keynes stated that, through monetary policy, they had found the way to turn stones into bread. There is plenty of wealth around, and the government can create all the money it needs to suits everyone’s requirements. It simply does not work. And citizens and voters all over the world feel financial repression and are reacting against it—maybe not understanding its cause—more and more radically.

If there is one thing that strikes me as crazy about this time of uncontrolled debt, it is that mainstream media remains convinced that spending and stimulus policies are “social.”

Many of these errors come from the glorification of Roosevelt’s New Deal, although UCLA studies and others¹ prove that the intervention policy prolonged the Depression another seven years. And it is also a mistake to assume that solutions to modern crises should come from the same as the Great Depression, when our time is the result of that same expense and credit excess that today we are told is the solution. Recent crises are the result of endless “New Deals” stacked one against the other.

The New Deal That Failed

The Great Depression dragged on for almost 15 years.

Analyzing President Roosevelt’s record for four years, Harold L. Cole and Lee E. Ohanian concluded in a 2004 study² that New Deal policies signed into law thwarted economic recovery for seven long years due to anti-competition measures that Roosevelt promoted and signed into law on June 16, 1933.

President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages and by extension reducing employment and demand for goods and services; so, he came up with a recovery package that would be unimaginable today: allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies.³

Meg Sullivan explained it in an article in UCLA.⁴ In the three years following the implementation of Roosevelt’s policies, wages in 11 key industries averaged 25 percent higher than they otherwise would have done, the economists calculate. But unemployment was also 25 percent higher than it should have been, given gains in productivity.

Meanwhile, prices across 19 industries averaged 23 percent above where they should have been, given the state of the economy. With goods and services that much harder for consumers to afford, demand stalled, and the gross national product floundered at 27 percent below where it otherwise might have been.

The policies were contained in the National Industrial Recovery Act (NIRA), which exempted industries from antitrust prosecution if they agreed to enter into collective bargaining agreements that significantly raised wages. Because protection from antitrust prosecution all but ensured higher prices for goods and services, a wide range of industries took the bait, Cole and Ohanian find. By 1934 more than 500 industries, which accounted for nearly 80 percent of private, nonagricultural employment, had entered into the collective bargaining agreements called for under NIRA.

Cole and Ohanian calculate that NIRA and its aftermath account for 60 percent of the weak recovery. Without the policies, they contend that the Depression would have ended in 1936 instead of the year when they believe the slump actually ended: 1943.

NIRA’s role in prolonging the Depression has not been more closely scrutinized because the Supreme Court declared the act unconstitutional within two years of its passage.

Unemployment persisted. By 1939 the U.S. unemployment rate was 17.2 percent, down somewhat from its 1933 peak of 24.9 percent but still remarkably high. By comparison, in May 2003, the unemployment rate of 6.1 percent was the highest in 9 years.

Recovery came only after the Department of Justice dramatically stepped up enforcement of antitrust cases nearly fourfold and organized labor suffered a string of setbacks, the economists find.

“The fact that the Depression dragged on for years convinced generations of economists and policy makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes,” Cole said. “Ironically, our work shows that the recovery would have been very rapid had the government not intervened.”⁵

Some criticize this analysis. Eric Rauchway⁶ states:

If the New Deal did not end the Great Depression, was it doing some good? Historical Statistics of the United States says yes: Except in the 1937–38 recession, unemployment fell every year of the New Deal. Also, real GDP grew at an annual rate of around 9 percent during Roosevelt’s first term and, after the 1937–38 dip, around 11 percent.

However, in the 1930s unemployment never fell below 15 percent. Five years into the New Deal, one in five U.S. citizens in the labor force were unemployed. In 1937 there were six million unemployed. By 1938 the figure rose to 10 million.

Unfortunately, it was not Roosevelt but the war that reduced unemployment. Around 20 percent of the workforce was absorbed by the war industry, with 42 percent of GDP spent in the process. However, inflation during the period was very high (close to 20 percent), and even with 1 percent unemployment there was rationing of basic products.

The United States finally escaped the Depression when the war ended; it cut 33 percent of taxes and started to lift barriers to competition.

The reality of hundreds of cases since then is that massive government intervention trying to fix the economy and putting limits to trade and competition creates a larger imbalance, slower recoveries, and—rapidly—another crisis.

At least defenders of Roosevelt’s policies should be intellectually honest to understand that undertaking government-spending stimuli when debt and spending are low and there is no slack in the economy is not the same as when debt stands at 100 percent of GDP, deficits are already huge, government spending exceeds 30 percent of GDP, and overcapacity remains.

Roosevelt multiplied debt by more than 10, from $22.5 billion to $258.5 billion, from 34 to 95 percent of GDP ... but this included a world war! Today we are under the illusion that debt amounting to 100 percent of GDP is OK even in times of peace.

Even considering a world war, government spending under Roosevelt never rose above 25 percent.... Before the horrible event of such a war, spending never rose above ... 12.5 percent!

And we call for New Deals today at an average government spend of 30 to 50 percent of GDP in the main OECD economies?

The dangerous thing is that we have seen nothing but “new deals” for decades. We live in a perennial New Deal with diminishing returns.

Source: Congressional Budget Office.

Yet defenders of inflationism and endless money creation resort time and time again to the messages we mentioned before: “It could have been worse,” and “This time it’s different.” Repeat.

Sorry, citizens all over the world do not accept this anymore.

Ludwig von Mises explained:

There is no use in arguing with people who are driven by “an almost religious fervour” and believe that their master “had the Revelation.” It is one of the tasks of economics to analyse carefully each of the inflationist plans, those of Keynes and Gesell no less than those of their innumerable predecessors from John Law down to Major Douglas. Yet, no one should expect that any logical argument or any experience could ever shake the almost religious fervour of those who believe in salvation through spending and credit expansion.⁷

In fact, citizens perceive that something is happening. In their pockets; in their wealth.

We Are Turning Bread Into Stones

And economic agents, policy makers, and investors must do something to avoid this increasing tide of completely justified rage.

The rise of protectionism, resistance to globalization, and the embrace of populism and extreme views surprise many. How can this happen when the EU, United States, and Japan’s policies are made for “their own good”?

How can citizens be so ungrateful to turn against the EU in Britain, or against Obama in the United States, and so on ...?

Many of them do not understand that a very relevant reason for the rise of inequality is financial repression and QEs, which disproportionately benefit those who have access to widespread credit and whose wealth is in financial assets.⁸

Standard and Poor’s, in 2016, noted that the Bank of England’s monetary policy measures alleviated the impact of the financial crisis of 2008 to 2009 and aided an economic recovery, but their side effects amplified wealth disparities, mainly by boosting financial asset prices and house prices.

The share of net financial wealth held by the wealthiest 10 percent of the population rose notably in the aftermath of the financial crisis, from 56 percent in 2008 to 65 percent in 2014, suggesting that wealthier households were able to anticipate and take advantage of financial market developments since the onset of QE, increasing their wealth in absolute and relative terms.

The reason for this disconnect between the size of QE and economic performance is partially the transmission channel from QE to the economy.

When the central bank buys government bonds, the sellers of those government bonds should move out the risk spectrum and buy more risky assets, including credit and private equity.

This does not happen, or at least to the extent that policymakers would want it to happen. Money goes to liquid financial assets. See Figure 11.1.

As such, investors pile up on more of the assets that are “guaranteed” by central bank buying. But it is also a mistake in the diagnosis.

Central banks believe it is a problem of incentivizing demand and credit, and it is not. So, excess liquidity does not change the behavior of economic agents. It makes the financial experts richer.

The easy response to the rise of income inequality is to blame capitalism—when it has nothing to do with capitalism—and, even worse, demand redistribution at all costs.

Figure 11.1 Stock market becomes more expensive

Source: Bloomberg.

As we have noted before, these are ineffective measures. More government control, “creation of money for the people,” and higher taxation are no solutions to abnormalities caused by government intervention, money printing, and excess taxation.⁹

Redistribution policies have a positive effect when supply-side measures and growth of the private sector and wealth are not penalized. When redistribution is the only policy, it just obliterates prosperity.

In fact, voters are not voting against inequality. Few are against fair inequality when success is granted and hard work justifies it. Very few complain about the salary of successful artists and top entrepreneurs, great athletes, or job creators. That is why the votes that have surprised the most—Brexit, Trump, and so on—were not in favor of socialist inflationist measures, but in favor of old-school trickle-down.

No one has ever died of inequality; it is poverty that kills. And beggarthy-neighbor is not a social policy. It is impoverishment by decree.

The reader might disagree and call monetary expansion a failure of capitalism, but it has nothing to do with capitalism and a lot to do with socialist views of providing unique and excessive incentives to governments and crony sectors so that they can access capital against the savings and wealth of SMEs and families.

Even if the reader disagrees, the question is simple. How do we get out of expansionary policies without another financial crisis that hurts, again, households and taxpayers the most?

Expansionary policies cannot last forever, and—as we saw with QE3—even defenders are more than surprised at how rapidly their idea of wealth effect and stability disappears.

Banks Don’t Benefit

There is nothing easier than entering a period of money-supply expansion. It is a central banker’s dream. It promises great success and easy solutions to complex problems, the governor becomes famous, spends hours on end in TV and radio interviews and everybody assumes he or she is the savior, Merlin the magician with a magic wand.

Some mention that banks are the main beneficiaries of QE. Not really. Negative rates and excess liquidity have had little discernible positive impact on banks. Margins collapse; lending is more difficult; and the positive impact on lower borrowing cost is more than offset by weaker margins.

The “positive effect” of the ECB offering a negative interest on liquidity does not reach 17 basis points in Net Income Margin (NIM). However, the negative effect of the erosion of margins in the European banks’ loans and deposits due to artificially low rates exceeded 89 basis points during 2015 to 2016, according to Mediobanca,¹⁰ which resulted in an average drop of up to 20 percent in their profits, with an increase default risk.

In Europe’s case, it could not be clearer. Since the ECB QE was launched until end of 2016, earnings of banks have fallen in absolute terms, relative to expectations, and the index also fell more than 25 percent. The Euro Stoxx Financials is down more than 50 percent since 2009.

The problem is getting out when so many—and such massively large—sectors are hanging by the thread of excess liquidity.

Mainstream View

Once in a liquidity trap, mainstream considers two means of escape.

The first is to use expansionary fiscal policy. The problem, in heavily indebted economies with relevant pockets of industrial overcapacity, is that expansionary fiscal policies tend to be “governments spending more,” and we have seen in previous chapters that infrastructure spending and traditional demand-side policies increased deficits and white elephants, create no further growth and leave the debt and the operating costs of the infrastructure project. Economies become less dynamic and taxes rise afterwards, to pay for the bill.

The second means is to lower the zero nominal interest rate floor. This option involves paying negative interest on government “bearer bonds”—coin and currency, that is “taxing money,” as advocated by Gesell. This would also reduce the likelihood of ending up in a liquidity trap.

Again, it does not happen. Negative rates make banks and economic agents be more cautious, and investors prefer to receive a small negative return than to lose more money in other asset classes. Money goes to Gold Exchange Traded Funds (ETFs), short-term speculative liquid assets.

Taxing currency amounts to having periodic “currency reforms,” that is, compulsory conversions of “old” currency into “new” currency, say, by stamping currency. The terms of the conversion can be set to achieve any positive or negative interest rate on currency. There are likely to be significant shoe-leather costs associated with such schemes. The policy question then becomes: How much shoe leather does it take to fill an output gap?¹¹ The answer is evident. The output gap might not widen but is perpetuated through real negative rates. In the previous chapters, we have seen how futile it is to try to encourage demand through financial repression.

In 2003, Svensson even talked of the “foolproof way”¹² to exit a liquidity trap. The “optimal” way involved three elements: (1) an explicit central-bank commitment to a higher future price level; (2) a concrete action that demonstrates the central bank’s commitment, induces expectations of a higher future price level, and jump-starts the economy; and (3) an exit strategy that specifies when and how to get back to normal.

Of course, this so-called foolproof way, which is exactly what mainstream recommended and central banks implemented point by point, resulted in lower growth, more debt, and financial asset bubbles. By 2016 even mainstream economists were talking of secular stagnation. The problem with these solutions is that all of them ignored structural reforms and the importance of paying attention to the impact of ever-expanding financial repression on the disposable income of consumers. The concerns of businesses about the economy were also ignored.

Believing in central planning to work its magic to deliver growth is rarely under question in most mainstream papers. If it fails, it is not because of central-planned alchemy, but because the recipe to convert stones into bread has a missing ingredient.

This approach can be found in Werning,¹³ who states that monetary policy promotes both inflation and an output boom, even if the latter is more than doubted. He proposes a decomposition of spending according to “opportunistic” and “stimulus” motives. This approach has also been tried over and over, but it always fails when the key variables, debt saturation and slack in the economy, remain, because both spending items add and perpetuate the imbalances that slow down the economy.

Others are more balanced. Schmitt-Grohé and Uribe’s interest-rate-based Taylor rule option¹⁴ looks at a policy designed to raise inflationary expectations over time while at the same time maintaining the Taylor principle close to the intended inflation target. What this theory looks for is a short-term “boost” from interest rates that does not require an accompanying fiscalist (or non-Ricardian) fiscal stance. This “balanced expansion” approach makes sense when the excess savings of families and businesses come from too high a cost of borrowing, and these economic agents would be willing to spend more and invest if financial conditions were looser. None of those cases happened in the formation of the OECD central bank trap. Interest rates were already extremely low and access to credit was plentiful—for credible projects with a real economic return. This approach was followed by the ECB, among others.

Supply-Side Is the Answer

My opinion differs entirely from these—already failed—options. Because the best way to exit a liquidity trap is not to create a bigger one. But what to do once it has happened?

The first thing we should note is that, yes, markets will fall and yields will rise. It is ridiculous to think it will not happen after inflating asset prices for years.

What’s important is to help citizens and SMEs separate the idea that financial markets are a reflection of the real economy and that something that, as we noted before, they have little exposure to, will not cause them harm.

This reduction in irrational exuberance can happen gradually while investors find more attractive opportunities in the real economy.

How can this happen?

Tax cuts are an essential factor. Letting the economy breathe, helping SMEs thrive, letting consumption rise, and allowing savings—yes, savings—to improve.

Wealth and prosperity always come from saving, not from debt.

The idea that it is better for governments to spend the money that others do not want to spend and therefore not cut taxes because citizens could—evil beings those—decide to save part of it is pure nonsense. First, because it is their hard-earned money and, second, because there is no evidence that the government knows better what has to be done with money.

Every time I read estimates of future tax revenues if countries raised taxes to “the rich” and large companies, I am amazed at the naivety of thinking that everyone affected is going to stay put and not react. I’ve never seen a single estimate reflect the potential loss of economic activity.

All these “expected revenues” assume that nothing would change. And I am dismayed at how little we look abroad.

And tax disincentives lead to Inversion Deals.

What are they?

Imagine that a company gets charged very high taxes. It may decide to acquire or merge with another in a tax-friendly country and move the corporate headquarters to that nation. Thus, the new group, with all the strategic reasons to merge, benefits from a preferential tax treatment.

The merged company must have less than 80 percent of its shareholder base in the United States, and at least 25 percent of the activity of the new group should be generated in the new headquarter center.

The problem, in most of the cases, is not only the tax burden, but the bureaucracy and the obstacles to generating economic activity. Many of the companies that left the United States for Canada or Ireland did it also because the conditions for their activity were more attractive.

Given the complexity of making the change to a different country, these transactions generally have a very clear strategic logic. Mergers “criticized” by the U.S. government since 2004 have created more than six million jobs worldwide and globally generate higher tax revenues in the countries where they operate.¹⁵

According to Congress, between 2015 and 2024, $18.5 billion of tax revenue could be lost to inversion. There was, however, no talk about how much more the United States could earn by lowering the corporate tax rate by five points, if we assume the same margins and profits of 2014 and an annual 1.6 percent growth in GDP.¹⁶

That concern for “lost revenue” would not exist if taxes went down. Is it a race to zero where the other countries would lower their tax rate even more? Of course not, as companies work with many scales of risk and opportunity. If taxation is competitive, it will not move because of small differences. There are many relevant factors.

Corporate tax rate in the United States is one of the highest in the OECD. Rather than reducing it, laws were implemented to avoid inversion deals, one in 1983 and another in 2004. Congress imposed its “ American Jobs Creation Act” of 2004. Of course, before long, inversion deals accelerated. Between 2007 and 2014 more companies left the United States to more business-friendly countries than in the entire period from 1981 to 2003, according to the Congressional Research Service.

Legislative repression and calls to patriotism, even inflammatory proclamations to “boycott” companies, have failed. The new administration in 2017 was looking at lowering the corporate tax to 17 percent, which is a logical step.

Tax receipts grow with economic activity, not because of a committee decision.

Does this mean no taxes and no public services? No. It means more efficient use of the vast resources that governments have, with the majority of it used for the best investment the public sector can undertake, and more support for education and health care. Note the word “support.” Let us not confuse education and health care with using the subterfuge to increase imbalances and wasteful spending, even less so confusing education with indoctrination.

Tax cuts are essential to let the economy recover and help disposable income rise when the uncertainty about the economy and labor market might not increase wages.¹⁷

As the economy recovers investment, consumption, and growth, wages will rise as overcapacity is reduced or eliminated and slack disappears from the economy.

Raising interest rates is essential to reduce overcapacity and allow banks to recover.

The current disproportionately low interest rate perpetuates overcapacity, and velocity of money and productivity fall.

This will allow some creative destruction in obsolete sectors, banks will be able to lend at rates that are closer to the real risk, and the engine of growth will come from higher-productivity sectors that do not need hidden subsidies of devaluation and low rates to thrive.

Structural reforms have to happen in the form of lower spending with higher efficiency, but also clear reforms that support investment in research and development at the private-sector level, so that investigation has a clear economic return and companies have strong chances to grow and thereby demand more jobs.

Promoting entrepreneurial behavior and the creation of new companies is also essential to tackle the slack in the labor market. Focus on creating your own job rather than finding it.

Central banks must at the same time have a very clear timeframe of monetary policy unwinding that does not fall under the cliff, killing credibility.

The Federal Reserve cannot promise four rate hikes and deliver one, when nonfarm payroll data remains solid and growth remains. Maybe the slowdown can justify only two rate hikes but not one. Credibility is essential so that financial markets do not take the warnings and communication as irrelevant because “it will not happen.”

Unwinding monetary policy has to happen with the previously mentioned target of confirming that structural reforms are implemented and government spending is controlled. Conditionality, as such, is key.

Beware of financial markets. Animal spirits cannot dictate a policy that is aimed at restoring disposable income, wealth, and opportunities for nonfinancial jobs and families.

But they cannot be ignored. Therefore, a concerted communication policy from government to media to central banks to avoid excess risk-taking must be accompanied by bold microeconomic measures of tax incentives, growth policies, and evidence that the private sector is back, hiring and investing with confidence.

Government deficit spending is an integral part of that confidence build. Deficits mean higher taxes in the future, or large imbalances that will surface through a crisis or high unemployment, when the placebo effect ends.

Therefore, control of deficits is an integral part of confidence-building. The EU has made an effort in this matter. But not enough.

The financial sector should continue to be monitored and use a period of higher rates to continue to build core capital and write down nonperforming loans. It will be a difficult period, but not any more challenging than the 2014 to 2016 period, and the entities will become stronger, with higher access to private capital while margins improve.

But the financial sector cannot be just a bet on banks improving. Economies with a large problem of overcapacity and excessive dependency on bank finance of the real economy must undertake structural reforms as well to help diversify and modernize the financing of SMEs and families, through fintech and crowdfunding or crowdlending.

All these are measures that need to be implemented with clear and immediate objectives to avoid the mistake of Japan, which “forgot” the third arrow.

In summary, these policies that we have outlined in this part come from the necessary recovery of credibility while citizens perceive a strong commitment to end the perverse incentives of what has been called the establishment, maybe unfairly. But it is important to have adequate checks and balances, with not just incentives, but disincentives when the correct measures are not taken.

We have lived more than 50 years in a world in which the dominant factors in economic and monetary policy have been demand-side measures and wrongly named “expansionary” measures, which has led to massive boom and bust cycles that happen more frequently and leave more of the middle class behind.

It is time to go back to supply-side policies, where moderate inflation is not an objective, but the result of improved growth that puts disposable income at the forefront. It is also time to end the dominance of financial markets as something to “pamper” through ever-rising asset prices; financial markets should provide capital and liquidity to the real economy so it can thrive in high-productivity areas, not cheap money for low-productivity white elephants.

Supply-side policies aim to enable the free market to work more efficiently by reducing government interference and by improving the economy looking at the benefits of higher competition, free markets, and improved productivity.

Reducing bureaucracy and barriers to entry to boost competitiveness.

Limiting government action in the economy to the role of simple and effective regulation, moving away from direct intervention in specific economic sectors, reducing unproductive subsidies, cutting red tape, and allowing competition to absorb overcapacity and improve technology and development.

Cutting income taxes and corporate taxes to boost growth, increasing consumption, and allowing deleverage to happen while economic growth is in place.

More private research and development, education, and training aimed at maximizing the output and real economic return of investments in research and development, with the focus on ideas that become startups, and in turn, companies, boosting jobs and growth. Education and training to adapt to a world that is rapidly changing and where students and citizens need to learn to become “leaders in change.”

Reducing government spending without compromising service and quality. Health care and education cannot be measured by how much is spent, but by how successful they are at delivering the service and quality required. Efficiency programs to focus public spend on real service, not increased budget management.

Slashing unnecessary red tape and bureaucracy which add to a business’s cost without any productive improvement to the economy.

Develop modern infrastructure without perverse incentives. A private-sector infrastructure program financed by tolls and tax incentives, not direct subsidies.

Supply-side policies play a role in fighting a low aggregate demand that traps an economy at the “zero lower bound” (ZLB) of nominal interest rates. Future increases in productivity or reductions in costs triggered by supply-side policies generate a stronger wealth effect than demand-side or QE measures do. This, in turn, pulls up current consumption and output. Since the economy is already at zero and negative interest rates, small increases do not undo this wealth effect.¹⁸

Demand-side policies had logic when government spending was less than 20 percent of GDP and there was an immediate and evident need for industrial and productive capacity, but the evidence of the past two decades is of saturation of such policies and too much debt.

There is a tremendous potential for developed economies if we forget the paradigm of growth via debt and recover the objective to rebuild the middle class by placing disposable income and saving at the forefront of policy.

This is the only way the world will escape the central bank trap without creating another financial crisis.

¹ FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression, Burton W. Folsom, Jim Powell, Foundation of Economic Education, 2010.

² New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis Harold L. Cole and Lee E. Ohanian, Journal of Political Economy, Vol. 112, No. 4 (August 2004).

³ Harold L. Cole, professor of economics, UCLA.

⁴ http://newsroom.ucla.edu/releases/FDR-s-Policies-Prolonged-Depression-5409

⁵ From an article and interview by Meg Sullivan, FDR’s policies prolonged Depression by 7 years, UCLA economists calculate, 2004.

⁶ FDR’s Latest Critics, Was the New Deal un-American? Eric Rauchway 2007.

⁷ Stones into Bread: The Keynesian Miracle, Ludwig von Mises. Plain Talk, March 1948.

⁸ QE And Economic Inequality. Standard & Poor’s, 10-Feb-2016.

⁹ The Paradox of Redistribution and Strategies of Equality: Welfare State Institutions, Inequality, and Poverty in the Western Countries. Walter Korpi and Joakim Palme. February 1998.

¹⁰ Keep Surfin the QE Tidal Wave, Antonio Guglielmi, Mediobanca, 2015.

¹¹ Further read: Liquidity Traps: How to Avoid Them and How to Escape Them. Willem H. Buiter, Nikolaos Panigirtzoglou. NBER Working Paper No. 7245, July 1999.

¹² Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others. Lars E.O. Svensson, NBER Working Paper No. 10195, December 2003.

¹³ Managing a Liquidity Trap: Monetary and Fiscal Policy. Iván Werning, MIT, 2010.

¹⁴ Liquidity Traps: An Interest-Rate-Based Exit Strategy, Stephanie Schmitt-Grohé, Martín Uribe. NBER Working Paper No. 16514, Issued in November 2010.

¹⁵ According to UBS. “A New Wave of Tax Inversions, 2015.”

¹⁶ Not a counterfactual. The impact of lower taxes on economic output has been discussed with empiric papers in chapter 10.

¹⁷ What Is the Evidence on Taxes and Growth? William McBride, 2010. Tax Foundation.

¹⁸ Supply-Side Policies and the Zero Lower Bound, Jesús Fernández-Villaverde, Pablo A. Guerrón-Quintana, Juan Rubio-Ramírez, NBER Working Paper No. 17543, October 2011.