Capitol Hill Blue Forums Political Issues Finance, the economy & Economics The Economy and Positive Thinking

*** First, we turn to Project Overreach: America’s Imperial Budget, 2008. George W. Bush et al. have been stretching in all directions. And now comes his party’s chosen successor, John McCain, with even longer arms.
McCain wants to lock in place Bush’s $350 billion of tax cuts...and then cut another $300 billion more. Here at The Daily Reckoning headquarters we’ve never met a tax cut we didn’t like. But it’s the other side of the ledger than concerns us. If revenues go down, how would McCain pay for all those spiffy projects – mortgage rescues, student loan bail-outs, the never-ending war in Iraq, bombing Iran...not to mention all the regular giveaways to America’s seniors, poor, cripples, veterans, bankers, and feeble-minded citizens?
The idea, put forward by Arthur Laffer and the Reagan crew, was that lower tax rates would stimulate economic activity and, ergo, more tax revenue to the government. But now, McCain’s top economist – Douglas Holtz-Eakin – says the estimates of increased tax revenue as a result of lower rates were “overblown.” As director of the Congressional Budget Office, he admitted to Congress that a “dynamic analysis” of tax cuts (taking into account the likely positive effect of cuts on economic activity) made essentially no difference to the outcome. Conclusion: if you cut taxes...you also must cut spending...or you’ll find yourself in the hole.
The Bush Administration has worked the United States into the biggest hole ever. Like Diocletian, Septimius Severus and Caracalla, the next president will face the consequences of overreach...inflation, budget deficits, and rapidly expanding debt.