Can Tax Cuts Pay for Themselves?
By SIMON JOHNSON
Can tax cuts “pay for themselves,” inducing so much additional economic
growth that government revenue actually increases, rather than
decreases? The evidence clearly says no.
Nevertheless, a version of this idea, under the guise of “dynamic scoring,” has apparently surfaced in the supercommittee
charged with deficit reduction — the joint Congressional committee with
12 members. Dynamic scoring sounds technical or perhaps even
scientific, but here the argument means simply that any pro-growth
effect of tax cuts should be stressed when assessing potential policy
changes (e.g., reforming the tax code). For anyone seriously concerned
with fiscal responsibility, this is a dangerous notion.
Thursday, October 13, 2011
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