Tag Archives: supply-side

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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More quotes from Bush White House affirming the Laffer Hypothesis

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In my earlier post, I catalogued some quotes from high Bush Administration officials asserting the Laffer claim that a cut in US tax rates stimulates income so much that the Treasury ends up taking in more revenue than before. I didn’t then quote in detail the extensive statements made by the Director of Office of Management and Budget, Joshua Bolten, in July 2005.

Director Bolton’s statements are of particular interest for several reasons. First, by 2005 it had become obvious to any objective observer that (1) the record budget surplus inherited by the Bush Administration had been quickly converted into a record budget deficit, and that (2) the aggressive Bush tax cuts were a major cause of that swing (as was the sharp acceleration in federal spending, both domestic and international, relative to the 1990s). Second, while the utterings of President Bush himself can in general perhaps be dismissed as not to be taken seriously, Bolten was the professional whose job is to be responsible for the integrity of the budget process. (Indeed, he is a higher-quality civil servant than some in the Bush Administration who have been quick to “bolt on” crazy ideological propositions to what should be serious positions.) read more

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“Are you now or have you ever been a Lafferite?” — Republican officials quoted on-record

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Following up on my preceding post, I will here document who has said what.

High officials in the Reagan Administration apparently did subscribe to the Laffer Hypothesis:
• Reagan himself: “…our kind of tax cut will so stimulate the economy that we will actually increase government revenues…” July 7, 1981 speech 1/
• His Secretary of the Treasury, Don Regan, even after events had falsified the proposition to the satisfaction of most observers, wrote of his “very strong opinion that a tax cut would produce more revenue than a tax increase.”2/
Also: “The increase in revenues should be financed not by new and higher taxes, but by lower tax rates that would produce more money for the government by stimulating higher earnings by corporations and workers…” (p.173). read more

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