The Laffer Curve and Fiscal Policy

The dynamic calculation would be supplementary and not replace the current official scoring methodology, but the obvious long-term goal is to require official revenue estimates to incorporate “Laffer curve” effects in order to make it easier to cut taxes and harder to raise them.

The Laffer curve, named for the economist Arthur Laffer, posits that tax rates may be so high that a tax-rate reduction will raise revenue to the government and a tax-rate increase will lower revenue.

While no economist denies the theoretical possibility of a revenue-raising tax cut or revenue-losing tax increase, Republicans talk as if the United States is always on the high side of the Laffer curve – no matter what the tax rates are – so every tax cut will pay for itself and no tax increase could possibly ever raise net revenue and thus reduce the deficit.

Read it at The New York Times | Economix

Tilting the Budget Process to the G.O.P.
by Bruce Bartlett
(Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.)

Must-read from the MMT perspective. It shows how the present budgetary process works from the right and how it is dictated by ideology rather than macroeconomic reasoning, let alone sectoral balances.

Republicans don’t really care about accurate revenue estimates; they just want them to show that tax cuts pay for themselves, so they can pass more of them without constraint. As my fellow Economix contributor Simon Johnson has noted, the corruption of the agencies that produce budget data is a crucial cause of Europe’s debt crisis.

Keven Drum chimes in at Mother Jones
Republicans Once Again Unleash Reality Distortion Field
by Kevin Drum