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Tax Cuts Aren’t Magic

April 27, 2010

Readers will know (and if they don’t, then I’m not as good of a communicator as I thought I was) that I think the Laffer Curve is one of the most interesting theories about taxation and budgets out there, mostly because I believe it has certain real world applications but cannot be applied to the point where our government will not have to cut spending to lower our deficits because somehow tax cuts can pay for themselves.  At NRO, Kevin Williamson has the data to back up that assertion, along with some interesting advice for conservatives with regard to spending and taxes.  The bottom line:

This we know: Tax cuts don’t get us out of the spending pickle, and growth isn’t going to make the debt irrelevant. Legislative mandates and gimmicks like spending caps and the like will not constrain the spendthrift habits of appropriators — because, if they do, they will be repealed, just like Gramm-Rudman was. You can’t starve the beast if the Chinese and the bond markets keep lending him bon-bons by the ton. And the prospect of enacting a balanced-budget amendment to the Constitution is a castle in the sky.

So, what should conservatives do? One, abjure magical thinking about tax cuts. Two, develop a rhetoric in which “spending” and “taxes” are synonyms, so a federal budget with $1 trillion in new spending means $1 trillion in new taxes — levies on Americans today or on our children tomorrow, with interest. Three, get a load of those tea-party yokels, with their funny hats and dysgraphic signage, and keep this in mind: They are opposed to the Democrats, but what they are really looking for is an alternative to the establishment Republicans, whom they distrust, with good reason, when it comes to the bottom-line question of balancing the budget and getting our fiscal affairs in good order. And then, finally, decide which angry mob you want to face: today’s voters or tomorrow’s bondholders.

My advice would be a little more specific and a little more politically suicidal.  Start hating Medicare/Social Security/S-CHIP as much as your constituents don’t, quit being so opposed to a VAT, and don’t be afraid to cut the defense budget.  Reigning in the deficit is a project for all fronts of federal spending, not just the ones that people want to cut (which, not quite so coincidentally, constitute not very much of the actual budget anyway).  But it is essential.

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