Tag Archives: Feldstein

The Return of Voodoo Economics

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Paul Krugman’s column in the New York Times today talked of the revival of “Voodoo economics” by some Republican politicians.  This refers to the Laffer Proposition that a cut in income tax rates stimulates economic activity so much that tax revenue goes up rather than down.   Gov. Sam Brownback, who is running for re-election in Kansas, has had to confront the reality that tax revenues went down, not up as he argued they would, when he cut state tax rates.

I disagree with one thing that Krugman wrote in his column: the idea that there was a long break,  particularly after George W. Bush took office, during which Republican politicians did not push this line.  To the contrary, I have collected many quotes from George W. Bush and his top officials claiming the Laffer Proposition during the decade of the 2000s.   The quotes are on pages 35-39 of “Snake-Oil Tax Cuts,” RWP 08-056, Harvard Kennedy School, 2008.   Here is one of many from him: “The best way to get more revenues in the Treasury is…cut taxes to get more economic growth.“ It is true that the chairmen of Bush’s Council of Economic Advisers did not support the Laffer Proposition, known as the centerpiece of “supply-side economics”.  But then that was also the case in the Reagan Administration. read more

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Four Magic Tricks for Aspiring Fiscal Conservatives

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Politicians who advertise themselves as “fiscal conservatives” sometimes campaign on crowd-pleasing pledges to cut taxes and simultaneously reduce budget deficits.  These are difficult promises to deliver on in practice, since the budget deficit equals government spending minus tax revenue.

Aspiring fiscal conservatives may be interested in learning four innovative tricks that are commonly used by American politicians who like to promise what seems impossible.   Each of these feats has been perfected over three decades or more.  Indeed they first acquired their colorful names in the early years of the Ronald Reagan presidency: read more

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Will Republicans Really Block Tax Cuts Because They Go Only to Earners Below $250K?

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President Obama proposes allowing the Bush tax cuts to expire next year — as they are scheduled to do if nothing is changed — for those earning more than $250,000, but changing the law so as to extend the tax cuts for those earning less than that amount.   Republican politicians are opposing the proposal.    I don’t understand what they are thinking.  Their position doesn’t make sense to me, regardless whether they are thinking about short-term stimulus, long-term fiscal conservatism, good economics, or even pure politics.    read more

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