Sunday, August 5, 2007

Laffing at You/Laffing with You

A few questions I'd like to have answers to:

I have to disagree with your contention, Bruce, that supply-siders are a dying wing of the Republican Party. If anything, they're now all supply-siders to the point that it's not even a point of self-identification anymore. Just look at this morning's Republican debate: Not one of the candidates said they would raise taxes to repair roads and bridges. Rudy Giuliani and Mitt Romney started saying they'd cut taxes to raise the government revenues.

If that's not a consensus of Lafferism, I don't know what is. Republicans have really bought into this little fairy tale, that we are forever and always on the far side of the hypothetical curve, and it seems like nothing can convince them otherwise — no matter how big the national debt gets along the way.

And furthermore, what exactly does the Laffer Curve look like? Can anybody produce one, based on actual economic statistics over a long period of time? As it is, the GOP has made a religion out of the fiscal solutions of 1981, and the imaginary curve just keeps getting pushed further and further back to justify more tax cuts. Forget about the religion and the articles of faith, I want to see some evidence.

Which brings me to these questions: under what circumstances would our modern Republicans approve of tax increases? Is there any such scenario where a pressing need would justify a raise in the marginal tax rates? Or is the solution to every last problem a tax cut, resulting in a quasi-Keynesian stimulus and debt accrual, all of which is then hailed as a victory of small-government conservatism? How will those Treasury Bills finally get paid?

David Yepsen was also looking for answers from the candidates and was largely disappointed at the answers provided at this morning's ABC debates -- which just might have been taking the "Morning in America" Reagan worship endemic amongst this year's wanna-bes a bit too far.

Anyway, if you've still got a jones for tax-cutting, here's the alternative:

I'd agree that it was important in the late 1970's and early 1980's to cut marginal income tax rates. They really had crossed the point of diminishing returns and were stifling the economy. But at the end of the day, tax rates are just one part of the equation. And this fundamentalist-like devotion to constantly cutting taxes that we see from modern Republicans is simply irresponsible. They're playing Santa Claus for current gains and passing a bill to future generations that would make Lyndon Johnson blush.

So given that we have a massive national debt, expensive foreign engagements, literally crumbling infrastructure, and grand new entitlements from the same administration that cut our taxes — as you said, "starving the beast" is a sham — we'll need to get the government revenue somehow. The alternative is we eventually default on Treasury Bills, which would plunge the economy into an even worse mess than any large-scale tax increase. It would be so bad, Americans would be illegally crossing the Southern border to look for jobs in Mexico while the United States is making concessions to the IMF and the World Bank.

Not exactly my idea of a good time.

MORE: The NYT offers a good reason why not buy Rudy's economic version of New York's revenue successes in the 1990s.

EVEN MORE: Mark Thoma channels Matt Yglesias and the media's reaction to Giuliani's tax policy.

MORE STILL: Ezra Klein via Angry Bear.

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