Tuesday, October 16, 2018

How's that Laffer-ism going?

The "best" spin the diehard Laffer lovers can put on this is that the tax cuts have not (so far) caused a revenue drop:   but at a time when the economy is supposedly booming, should not revenues be up (and used to reduce budget deficit?)    Instead, why not ensure you will make revenue growth flat, and try increasing spending at the same time, hey Republican fiscal worriers?  Look, even the WSJ agrees with me (and pay attention to the two last lines in particular):

WASHINGTON--The federal deficit widened last year amid higher government spending—including rising interest costs on the debt and increased funding for the military—and flat revenues following last year’s tax cut.

The government ran a $779 billion deficit in the fiscal year that ended Sept. 30, the Treasury Department said Monday. That is the largest annual deficit in six years and 17% higher than the $666 billion deficit in fiscal 2017. As a share of gross domestic product, the deficit totaled 3.9%, up from 3.5% a year earlier and the third consecutive increase.

The deficit would have been even higher if not for shifts in the timing of certain payments, Treasury said.

Government receipts held steady at $3.3 trillion, despite strong economic growth and a robust labor market. The low unemployment rate, which hit 3.7% in September, coupled with rising wages would typically drive government tax revenue higher.

But individual withheld income taxes rose just 1% in fiscal 2018, and corporate tax receipts declined 31%—both reflecting changes implemented as part of the sweeping tax overhaul enacted in December.

Trump administration officials had argued last year the new tax law would generate enough economic growth to offset the costs of a tax cut. Treasury Secretary Steven Mnuchin went further, at times saying the changes would actually help reduce the deficit. Monday’s report showed that, so far, that is not happening.
What an insult to policy common sense.

1 comment:

not trampis said...

Steve,

you are a bit young but this same feeble excuse was used for the Reagan and Bush tax cuts and the revenue surge never occurred either.