And I thought Bush was an idiot for talking like it was a truism.
For background on whether lowering taxes can INCREASE revenue (aka Reaganomics, Supply Side Economics, Trickle Down Economics, Voodoo Economics) I highly recommend:
http://en.wikipedia.org/wiki/Laffer_curvePersonally, I did a paper on the elasticity of Labor Supply and found it to be rather inelastic. This is all the more so because now most households are locked in to a two income earner situation. The fact that this is all the more so in 2007 than it was in 1980 makes any notion of Reaganomics at this point in history all the more absurd.
From:
http://matthewyglesias.theatlantic.com/archives/2007/08/laffer_press_roundup.php
Laffer Press Roundup
06 Aug 2007 11:38 am
Here's an interesting test case for the press. It seems that at yesterday's GOP debate, Rudy Giuliani derided the idea that higher taxes raise revenues as a "Democratic, liberal" assumption and put forward his alternative view that you generate revenue by lowering tax rates. This is a stunning confession of total ignorance of tax policy and economics by the GOP front runner. So how did the press cover it? Chris Cilizza at the Fix lives down to my expectations by totally ignoring the fact that Giuliani is incorrect:
"There is a liberal Democratic assumption that if you raise taxes, you raise more money," said Giuliani to huge applause from the crowd assembled at Drake University.
Michael Shear in The Washington Post's page A1 story also doesn't care about the merits of the issue:
"Former New York mayor Rudolph W. Giuliani sparked loud applause when he declared that "the knee-jerk liberal Democratic reaction -- raise taxes to get money -- very often is a very big mistake." And Rep. Duncan Hunter (R-Calif.) declared his disappointment in the Democratic push to end the war in Iraq."
Nor does Stephen Braun of The Los Angeles Times care at all whether or not GOP tax policy makes sense:
"Referring to last week's devastating bridge collapse in Minneapolis, the GOP rivals found common ground in insisting that increased private investment from cutting taxes would provide more money to repair the nation's failing infrastructure. And they teamed up in turning their aim at the Democratic Party's presidential field.
Mike Glover at the AP doesn't seem to mention the issue at all. "
Adam Nagourney at The New York Times, by contrast, doesn't go nearly as far as I'd like, but does way better than his colleagues at the major papers. Here he is on the NYT political blog:
"Mr. Giuliani proceeded to explain that when he was mayor of New York he had cut taxes, and that those tax cuts had produced revenues that allowed him to finance bridge reconstruction. (Actually, there’s a good argument that it was the stock market boom in New York that brought all that money into the city’s coffers, but we’ll let that pass for now)."
And here he is teamed up with Michael Cooper in the print edition:
"Mr. Giuliani said that as mayor of New York, he had increased revenues to pay for bridge and road repair by cutting taxes, thereby jolting the economy, and that he would do the same thing as president. The city’s treasury in that period was flush largely with revenues produced by the stock-market boom of the late 1990s."
It'd be nice to see reporters go further than Nagourney does here, but improvements at the margin deserve recognition and the Times is doing a much better job than the Post here.
