During the tense Republican hostage taking crisis that Americans experienced over the last number of weeks, a pseudo-argument popped up from the conservative side which asserted, repeatedly, that tax cutting doesn't cost the government anything. Tax cuts are not spending.
That pseudo-argument has been sticking in my craw, not because it is compelling, but just the opposite.....because it is just silly.
But then....I thought about another historic conservative pseudo-argument over tax cuts which is just as silly. The conservative twin to "tax cuts are not spending" is "tax cuts increase government revenues."
As Republican Senators have claimed.......
In 2007, Sen. John McCain, R-Arizona, said, "Tax cuts, starting with Kennedy, as we all know, increase revenues"; Sen. Kay Bailey Hutchinson, R-Texas, claimed that "Every major tax cut we've had in history has created more revenue," and Senate Minority Leader Mitch McConnell, R-KY said earlier this year that the myth represented "the view of virtually every Republican on that subject."
It's also complete nonsense, and it's worth noting that only conservative politicians and pundits make the claim -- economists across the ideological spectrum agree that the argument is cursed by voodoo math.
As Time Magazine's Justin Fox noted in 2007, "Every economics Ph.D. who has worked in a prominent role in the Bush administration acknowledges that the tax cuts enacted during the past six years have not paid for themselves "and were never intended to." Harvard professor Greg Mankiw, a former chairman of Bush's Council of Economic Advisers, dedicated a whole section of his economics textbook to debunking the claim.
Andrew Samwick, who served as chief economist on Bush's Council of Economic Advisers, wrote, "You are smart people....You know that the tax cuts have not fueled record revenues... You know that the first order effect of cutting taxes is to lower tax revenues."
Outside of the loaves and the fishes fable from biblical lore.....whenever you reduce the amount of something, you have less of it.
If everyone in a neighborhood traditionally baked two dozen Christmas cookies to share with neighbors at an annual Christmas get together.....and then, a new tradition begins with neighbors only bringing 1 dozen cookies to the annual party.....there will be fewer cookies at the annual neighborhood Christmas shindig.
The neighborhood cookie bakers will not be incentivized to bake more cookies than ever because the neighborhood "bring cookies" tradition has lowered it's quota.....why would they? In fact, if the neighbor bakers are only bringing one dozen cookies when they used to bring two dozen....those cookie bakers will actually be incentivized to bake FEWER cookies overall. Why? Because they can keep one more dozen for themselves, reducing the total number of cookies they would need to bake for the Christmas season.
Now, all of this is mind-numbingly obvious.....I know.....and yet, Americans in 2010 are still being subjected to childish assertions from Republicans that when there is less of something.....tax revenues.....there's actually more.
This year the pseudo-argument from Republicans has been that tax cuts are not spending. Whenever taxes are cut, conservatives say, it doesn't cost the government anything because, somehow, cutting taxes is not spending. What cutting taxes is, conservatives say, is simply giving Americans back their money....you know, it's their money.
Theoretically, then, if the government gave Americans back all of their taxes.....it wouldn't cost the government, or anyone, a penny.....because, tax cuts are not spending.
This is just as silly as the "less is more" conservative assertion.
Let's say you have an agreement with your employer about future pay raises. Every year like clockwork you receive a 3% increase in your salary. You factor that 3% increase into your long range budget. Based on your long range budget, including the 3% yearly increase, you put aside X amount for retirement, Y amount for another car in a couple of years, etc.
If your employer changes the original 3% yearly increase agreement......deciding, instead, to forego yearly increases altogether....does it cost you anything?
Think about it.
Furthermore.....I have never heard of borrowing money for something when spending was not involved. Maybe it's just me, but why would I borrow money if I was not going to spend that money in some way? Everyone agrees, although Republicans do so reluctantly, that the Treasury must borrow money by selling bonds to pay for the extension of tax cuts. Bonds that will have to be paid for eventually with real money. Why is the government borrowing money? In order to spend that borrowed money giving Americans some of their taxes back.
How that is not spending is way beyond my paygrade as a lowly blogger.....but then, I never did quite "get" the "less is more" fable either.
About This Blog