[Dahoser]

If Larry could only survive a confirmation hearing. Sigh. He'd make a great Fed Chief or Treasury Secretary.

[UpNAtEm]

"Washington revenue estimators who project rising deficits in response to the tax cuts are..."
Bald-faced liars. Look at the time of year where Tax Freedom Day falls. This year, it's nearly at its record point in the year. It's not quite as late in the year as it was at the end of the Clinton administration, simply because of the 2001 tax cuts. It's later in the year than it was when Kennedy and Reagan cut taxes and saw revenue growth, indicating that the nation is currently overtaxed.

[Grampa Dave]

Larry Kudlow Bump!

[traditionalist]

Well, I agree with his general point, but this statement is false:

Any connection with deficits is fuzzy at best.

This is simply untrue. When the government runs deficits, it has to compete with the private sector for capital. That can drive up interest rates in an environment where people are likely to substitute the purchase of government securities for corporate securities. In such an environment, corporations will be forced to increase the interest rates they offer on their securities in order to compete for capital with the government. We're not in such an environment right now, however, so the deficit should not present too bad a problem.

Deficits are also bad in the long run because they reduce the savings rate, but our deficit is likely to go away when the economy picks up again.

[Recovering_Democrat]

It is a shame this thread didn't have more readers/respondents. This argument will, I predict, be a primary one in the coming years as Constitutionalists try to lessen the tax burden on America. Socialists, meanwhile, will use the "higher interest rates" argument as a way to try and dumb down the average citizen.

[hripka]

It was a near-perfect illustration of the Laffer Curve, which says: Tax something more, get less of it; tax something less, get more of it.

This is NOT the Laffer Curve. This is the Reagan Equation.

The Laffer Curve, as I understand it, suggest that there is a "perfect" point of tax rates/government revenue.

Too high a tax rate, and there is more evasion, slacking off, etc. and government revenue declines. Too low a tax rate, and the government basically leaves money on the table when it could be extracting more. Conservatives have never acknowledged the low tax half of the Laffer Curve.

Conservatives think that currently we are on the "right" side of the curve (high taxes which hurt incentives) and should move tax rates lower so that eventually the gov't has higher revenue.

The HIDDEN danger in the Laffer Curve that conservatives have never faced is that the underlying premise says that gov't revenues can be MAXIMIZED. Unbeknownst to them, they are actually advocating a LARGER government. And ironically enough, it has been conservatives who have bought into the conventional Laffer Curve argument for the past 20 years.

However, why should we even be looking for that magical point that gives the government the most revenue? Shouldn’t we go even further in tax rate reduction, toward the other side of the Laffer Curve, and have lower rates AND reduce government revenue? That way we would have the best of both worlds: a low tax rate that encourages income, spending, saving, and all of the things that good earners/consumers/citizens should be doing, while also keeping money AWAY from an entity known to be grossly inefficient.

Break on through to the other side of the Curve, and see good things happen.