John Stossel has a weird discussion, which starts off OK:
The federal government keeps growing, as I pointed out last week, but the Bush administration has cut tax rates a few times since 2001. How can that be? The answer is simple: deficit spending.Some Republicans argue that deficits don’t matter; that if you cut taxes, everything else takes care of itself. But that’s a myth.
But then he launches into the free lunch myth of the Laffer curve. This is followed by what appears to be a return to reality:
there’s a downside to cutting tax rates without cutting spending. Deficit spending disguises the real burden of government. As a result, we get more than we’d want — and that’s not good. Government makes up the deficit either by borrowing, which removes productive resources from private hands and must be repaid by future taxes, or by creating money out of thin air – inflation – which steals purchasing power from us by devaluing our money. In other words, tax cuts without spending cuts are an illusion. The burden of government has not really been lightened. As the late Milton Friedman constantly pointed out, that burden is better measured by the level of spending, not the level of taxes. Shame on the Bush administration for trying to pull a fast one on the American public.
Nice! Even better, he follows this by correctly noting that the falling unified deficit is due to the increase in Trust Fund surpluses. So this was not fit for the National Review. But maybe he felt bad for joining the Reality Based Community, which is why he had to write this:
Let’s give President Bush some credit for the falling deficit. Because of his tax cuts, tax revenue – our hard-earned money – is pouring into the government’s coffers, Government spending is keeping ahead of that torrent, but at an ever-slower rate. Hence the shrinking deficit. But this is not necessarily a good thing. Bush boasted last year, “This economy is growing, federal taxes are rising, and we’re cutting the federal deficit faster than we expected. Some in Washington say we had to choose between cutting taxes and cutting the deficit. Today’s numbers show that that was a false choice. The economic growth fueled by tax relief has helped send our tax revenues soaring.” But I don’t want tax revenues to soar.
This kind of Laffer lunacy set Mark Thoma off. Mark has some real choice words for John. But if John takes this Laffer Curve stuff seriously and he wants less tax revenues, wouldn’t his policy prescription be an increase in tax rates? But let’s be fair. Stossel is hopelessly confused here – which is the kind of stupid nonsense we see from the National Review on a routine basis.