The Myth That the Bush Tax Cuts Are Causing the Deficit…

I’ve said it time and time again:

  • Deficit == Spending – Revenue
  • Revenue == f(GDP); Revenue =/= f(tax rates)
  • Therefore, the federal deficit is a problem with spending, not with too-low tax rates.

And here I have yet another graph to beautifully illustrate this point.

See that? Tax receipts drop with recessions, and actually rise after the passage of the Bush tax cuts. We can’t ever match the current spending trajectory in revenue by raising tax rates, because tax receipts in the US max out around 20% (Hauser’s Law).

I know I probably sound pedantic, but at this point, it’s just absurd that people keep clinging to the ignorant notion that tax cuts “add cost,” when in fact they simply don’t. Counter-intuitively, tax cuts can even reduce the deficit if they allow the GDP to grow more rapidly. It’s called the Laffer Curve, and the evidence clearly demonstrates that we are still at the high end of it.

Game over. Tax cuts and spending cuts win. Either you agree, or you’re ignoring the MOUNTAINS AND MOUNTAINS of counterexamples against whatever pseudoeconomic philosophy you claim to follow.


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