sagascend
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Joined: 17 Jun 2006
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 Posted: Mon 22 Sep 2008 14:00 Post subject: Is McCain a Lafferite? |
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http://econ4obama.blogspot.com/2008/05/few-weeks-ago-i-attended-talk-at-tax.html
| Quote: | Is McCain a Lafferite?
A few weeks ago, I attended a talk at the Tax Policy Center with McCain's economic advisor, Doug Holtz-Eakin. (See here for an earlier post on the talk.) The audio of the complete talk is on this page.
During the Q&A, one questioner asked "Does Senator McCain believe that tax cuts pay for themselves?" Holtz-Eakin responded "No."
I followed up by asking how he could reconcile this answer with the fact that McCain has on multiple occasions said that he subscribes to the Laffer hypothesis that cutting taxes increases revenues. For example, he told the National Review:
| McCain wrote: | | Tax cuts, starting with Kennedy, as we all know, increase revenues. So what’s the argument for increasing taxes? If you get the opposite effect out of tax cuts? |
The essence of Holtz-Eakin's response was that if you talk as much as McCain does, "you will occasionally cut corners and say things that are too blunt. That's all that's going on." You can listen to the audio clip here:
There you have it. When McCain says something that is untrue, he's just being "too blunt."
This is the economy policy version of McCain's repeated assertions that Iran is training al-Qaeda. The problem is not just that these claims are demonstrably false--it's that they are false and crucially important to policy. These very falsehoods could be used to justify government-bankrupting tax cuts and a war with Iran, which is exactly what we're likely to get if McCain is elected.
(I didn't have a chance to ask Holtz-Eakin why it is, if he thinks Laffer is full of it, that Laffer is a special adviser to McCain, as Jeff Frankels pointed out.) |
The Laffer hypothesis is the basis of recent Republican taxation and spending policy, which basically states that cutting income taxes raises tax revenue. While this hypothesis is supported when marginal tax rates are extremely high, U.S. tax rates are much too low for this proposition to hold up.
John McCain appears to support the Laffer hypothesis, and, while Reagan's and Bush I/II's economic advisors did no such thing, this notion has strong political support in the right, so these presidents might rightfully be called Lafferites in practice too. It is improbable to me that McCain would not continue the same failed economic and international policies that brought us the 5 trillion dollar national debt and astronomical defecit spending.
Cutting income taxes has actually decreased revenues and increased budget deficits. It happens every time a Lafferite makes it to office, at least since 1980 (Reagan, Bush I, Bush II).
The illusion of Republican fiscal responsibility at the federal level is laughable: The only period in which the U.S. cut spending and started to balance the budget was when Clinton was in office (again, after 1980).
http://finance.yahoo.com/expert/article/economist/4065
http://content.ksg.harvard.edu/blog/jeff_frankels_weblog/2008/03/27/does-mccain-believe-the-laffer-hypothesis/
Very long article but worth reading if you have 15 minutes or so: http://www.epi.org/content.cfm/bp221 |
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