WSJ on Paygo and Laffer Curve
Mark Thoma is a must read as he notes the WSJ oped pages critique of paygo:
“Paygo,” as Washington insiders call it, sounds like a fiscally prudent budget practice: If government spends more on program A, it has to spend less money on program B, and thus budget deficits will be restrained. We’re all for that. But when Republicans proposed exactly that budget rule in recent years, House Democrats voted it down.
Oh Lord – it’s the Kudlow canared about spending paygo with no revenue paygo. The WSJ oped continues with a claim that this is really about blocking even more tax cuts and making it easier to reverse some of Bush’s earlier tax cuts. Mark blames the WSJ for its previous Laffer curve assertions.
But fellows, the facts show that real tax revenues per capita were reduced by Bush’s tax “cuts”. And the Laffer curve assertions that these tax cuts raised long-term growth look really silly when one recognizes two facts: (1) national savings was reduced; and (2) the labor force participation rate is lower today than it was in 2000. Given the fact that Federal spending has increased, President Bush’s fiscal policies have already raised taxes but deferred the responsibility of collecting them to future governments. Since the WSJ oped pages can’t recognize such simple realities, I’m not sure why one of the world’s best business newspapers continues to tolerate the stupidity and mendacity displayed on its oped pages. After all – one can read this malarkey over at the National Review.