Taxes and Spending: Why conservatives should focus more on cuttting spending rather than cutting taxes

Even with the economic benefits of lower taxes, most tax cuts do not actually pay for themselves.  The effects of the tax cuts are almost always less extreme than most democrats or even the CBO would estimate.  The Laffer curve assigns real economic benefits for tax cuts. The benefits can be assigned by the video below:

I show this Laffer curve video to show that I understand the benefits in lower taxes. 

There is a fallacy that many, if not most Republicans make, which many, if not most people instinctively believe. Taxes are not where we should be focusing our attention. We should be focused on spending. Most tax increases do not actually pay for themselves.  Cato explains:
Simply stated, too many Republicans have fallen into very sloppy habits. They oftentimes fail to understand the difference between “supply-side” tax rate reductions that actually improve incentives to engage in productive behavior and social-engineering tax cuts that simply allow people to keep more money, regardless of whether they create more wealth.
If we lower taxes without reducing spending, we are just exchanging current taxes for future taxes. Even worse, the gov't has to go out and float debt or inflate, which make interest rates higher for everyone. That is an unseen tax. Walter Williams explains this well:

The government can increase its spending only by reducing private spending equivalently. Whether government finances its added spending by increasing taxes, by borrowing, or by inflating the currency, the added spending will be offset by reduced private spending.
In other words, overall tax rate is not the only way we can get charged for excess spending.  Heavy borrowing increases the rates that you and I pay on our credit cards or mortgages.  Inflation is a hidden tax. Laffer curve be damned, there is an excellent piece in the National Review which explains our position about taxes and spending:
There are two schools of thought about the Reagan tax cuts. The conventional conservative view: They spurred investment, entrepreneurship, and real economic growth, helping to resuscitate the post-Carter economy, and, by doing so, they paid for themselves. The conventional liberal view: They were an ill-considered product of starve-the-beast ideology and produced crippling deficits, inaugurating a new era of fiscal irresponsibility only briefly transcended during the golden years of the Clinton presidency.

Here’s a different take: They never happened.

Properly understood, there were no Reagan tax cuts. In 1980 federal spending was $590 billion and in 1989 it was $1.14 trillion; you don’t get Reagan tax cuts without Tip O’Neill spending cuts. Looked at from the proper perspective, we haven’t really had any tax cuts to speak of — we’ve had tax deferrals. Reagan and his congressional allies had an excuse in the considerable person of Speaker O’Neill. But George W. Bush and the concurrent Republican majorities in both houses of Congress didn’t manage to cut spending, either. Part of that was circumstances — 9/11, Afghanistan, Iraq, the subprime meltdown — but part of it was the fact that a poorly applied supply-side analysis has infantilized Republicans when it comes to the budget. They love to cut taxes but cannot bring themselves to cut spending: It’s eat dessert first and leave the spinach on the table.


Popular posts from this blog

October retail sales come in strong, especially auto sales

Tea Party Buffalo Pictures

How to spot a fake Tea Partier