May 15, 2006

Voodoo Economics

That this is even up for debate boggles the mind.

    Nobody serious believes that tax cuts pay for themselves, as I noted last week. But most senior Republicans flunk this test of seriousness.

    In January, George W. Bush declared that, "by cutting the taxes on the American people, this economy is strong, and the overall tax revenues have hit at record levels." Regrettably, this endorsement of what his dad called voodoo economics was not a one-time oversight. The next month, Bush told a New Hampshire audience, "You cut taxes and the tax revenues increase."

    Bush is not alone in this. Dick Cheney, allegedly a serious person, asserted in February that the "tax cuts have translated into higher federal revenues."


Nonsense. The Laffer Curve has been proven time and time again by history.

Just search our archives.

Here's a great graph from TaxProf Blog.
revenue20growth.jpg

While it is true, our deficits are higher than nearly ever before, it's not because of tax cuts. It's because of increased spending! Our President and Congress can't seem to agree on stopping the spending!

Economics and Markets Posted by AlexC at May 15, 2006 12:22 PM

Jonathan Chait in TNR claims that tax cuts actually cause increased spending, while he ridicules Republicans for claiming that they cause cuts in spending.

http://www.tnr.com/doc.mhtml?i=w060515&s=chait050815

Maybe someday, there will be a politician who wants to cut taxes AND cut spending. That'd be something!

Posted by: jk at May 15, 2006 1:39 PM

Well increased revenues mean increased spending. Politicians have no self control. Maybe a few are out there.

I'm hoping.

Posted by: AlexC at May 15, 2006 2:05 PM

The TNR article is subscription only so I couldn't verify this, but one reason you can say "tax cuts actually cause increased spending" is because, in beltway budgeting lingo a "tax cut" is classified as an "expense." "Gee, I'm not sure the Government can afford to let you keep that last twenty Mrs. Smith."

But to the original point of the post, since a grand total of two, supposedly uber-conservative, economists theorize differently, but, [QUOTE:] The Republicans' only argument is that tax receipts have boomed in the years since the 2003 tax cut, [END QUOTE] you essentially find yourself being asked, "Who ya gonna believe? Me, or yer lyin' eyes?!"

This seems like an appropriate time to share one of Macho Duck's prodigious quotes: "In theory there is no difference between theory and practice, but in practice there is."

Be sure to follow AlexC's original link to the WaPo column that spawned this. When I form a mental image of 'The Fountainhead's' Ellsworth Toohey, THIS is the picture that appears.

Posted by: johngalt at May 15, 2006 3:34 PM | What do you think? [3]