Deficits and Tax Cuts

I am not a deficit hawk, but the Bush deficits are larger than can be sustained. I will not explain this further, because I trust that BTP readers know arithmetic. The tax cuts contributed to this deficit. There is no serious economic model that shows tax cuts paying for themselves. The Congressional Budget Office (under the direction of a Bush administration economist) did an analysis of Bush's tax cuts using a wide range of economic models, and none showed them to do anything other than increase the deficit. In a best case scenario, increased economic growth can offset 15-20 percent of the cost of the tax cut in the short-term.

Given the lack of ambiguity in economic models, why does the Post feel the need to treat the argument that tax cuts pay for themselves seriously? Sell these people some swamp land in Florida.

By the way, the Post also deserves a big kick for not reporting on the size of the deficit relative to GDP. That is the only way to make the context meaningful. The unified deficit measured as a share of GDP would be a relatively modest 1.7 percent for 2006. The on-budget deficit, which adds in the money borrowed from the Social Security trust fund is 3.2 percent.

-- Dean Baker

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