Making the United States More Like Greece
Simon Johnson at Baseline Scenario writes in Making the United States More Like Greece:
One of the big problems in Greece over the past decade or so is that the government was not honest with its data. Various people assisted in the matter – including Goldman Sachs with respect to some debt issues – but ultimately this was a political decision at the highest level. The people running the country decided to conceal the true nature of their budget and their debt. This deception ended up costing the country dearly – completely undermining its credibility under pressure and making it much harder to turn the fiscal and economic situation around.
In the modern United States, cutting taxes leads to lower revenue and larger budget deficits. There are no two ways about this – as Ronald Reagan discovered in the early 1980s. (In our new book, White House Burning, we go through the evidence on this point in detail, including important work by Greg Mankiw, former top economic adviser to George W. Bush and now working with Mitt Romney, which confirms that cutting taxes in the U.S. will lower revenue.)
But many Republicans feel that this is not true – in my conversations with them, for example in congressional hearings over the past year, the conviction seems to be that the research on this topic is bad science, even when done by Republicans. But convincing the CBO to abandon its proven and sensible approach to budget scoring has been difficult.
The solution currently under consideration is simple in its elegance – and downright frightening in its implications.
Simon points us to via this post that was ungated at his request at Tax Notes.