☕ John Tamny reviews a new book by Richard Salsman.
All of this speaks to another area of disagreement with Salsman ahead of the ones that will conclude this review. He correctly notes that the Keynesian “demand-side model was so discredited in the 1970s” in concert with vindication for supply-side economics, which “delivered such positive financial-economic results in the 1980s and 1990s.” There’s no dispute that supply side won precisely because the latter is a tautology: when the tax, regulatory, tariff, and debased money barriers to production are shrunk, booming economic growth is the result. Supply side makes perfect sense, but it’s arguable that supply-siders have become ridiculous to the point that their policies have become self-suffocating. Indeed, supply siders, in their worship of the rising revenue implications of tax cuts, have forgotten that government spending is the biggest tax of all. And in ignoring rising government spending, they’ve allowed the genius of their tax cut, deregulation, free trade, good money policy mix to be neutered. Figure that the posthumous John F. Kennedy tax cuts were great for economic growth, and as a result, gifted Treasury with a revenue surge in 1965. The latter gave Congress the means to for instance introduce Medicare; a program that was initially funded with $3 billion. The problem modernly is that a program which once cost $3 billion is projected to cost $1 trillion by 2025. Taking nothing away from the good of supply side policies, if not met with spending cuts, they’re not nearly as effective as they otherwise would be.
The problem with supply siders isn’t their belief that deficits don’t matter, but it’s a major problem their belief that government spending doesn’t matter. This reviewer wishes Salsman had spent more time on this point. As a deficit realist, Salsman plainly doesn’t like government expanding beyond strict constitutional limits. Ok, but rising federal revenues have enabled just that, not to mention that it’s much easier for governments to issue new debt if incoming tax revenues are abundant.
☕ Dan Mitchell lists nine great reasons to slash the corporate tax rate.
As far as I’m concerned a “tax war” is desirable because that means politicians are fighting each other and every bullet they fire (i.e., every tax they cut) is good news for the global economy.
Now that I’ve shared some good news, I’ll close with potential bad news. I’m worried that the overall tax reform agenda faces a grim future, mostly because Trump won’t address old-age entitlements and also because House GOPers have embraced a misguided border-adjustment tax.
Which is why, when the dust settles, I’ll be happy if all we get a big reduction in the corporate rate.
Stephen Moore and Jon Kyl take to the Wall Street Journal to talk about the President’s insane tax policy:
The ripple effect of the president’s tax hikes is swamping take-home pay.
The high corporate tax rate is also holding the economy back. Twenty years ago the U.S. rate was about at the international average, but now we are about 15 percentage points above the rate of most of our competitors and nearly three times higher than countries like Ireland. The American Enterprise Institute has found that “a 1% increase in corporate tax rates is associated with nearly a 1% drop in wage rates” because when corporations invest less here at home, worker productivity suffers.
Mr. Obama’s investment tax hike was designed to soak the rich. But it is the middle class who have taken a bath. Republicans should be telling American wage-earners that the best way to increase their take-home pay is to repeal Mr. Obama’s tax hikes and chop the corporate tax rate to the international average, so more and better jobs are created on these shores, not abroad.