☕ Larry Kudlow appears in the New York Sun with this piece:
In recent years, this static modelling has led to the notion that tax cuts need a “pay-for.” If you don’t cut the budget enough, you don’t get your tax cut.
Almost weirdly, the scorekeepers are happy with tax hikes, allegedly to balance the budget. But tax hikes depress economic growth, which reduces GDP. And with a smaller income base, actual revenues decline, simply because most everybody is worse off.
In truth, the best way to balance the budget is to reduce tax rates and provide new incentives for faster growth, which then expands the income base and throws off more revenues.
Brian Domitrovic and I, in “JFK and the Reagan Revolution,” quote President Kennedy’s 1962 speech to the New York Economics Club. With high drama, the Democrat turned against the New Deal, saying, “it is a paradoxical truth that tax rates are too high today [91% top rate] and tax revenues too low, and the soundest way to raise revenues in the long run is to cut rates now. . . . The reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment.”
Twenty years later, Republican Ronald Reagan duplicated the JFK tax cuts to liberate a stagflationary economy. Today, the JFK-Reagan approach would rescue a stagnant economy. But the scorekeepers stand in the way. They’re part of the swamp. They’re telling President Trump that one cannot lower tax rates without pay-fors.