If You Like Huge Deficits, More Tax Cuts Are for You
July 16, 2010
Via Ezra Klein:
As you see, extending unemployment insurance benefits causes a temporary blip in deficit spending. But the effect of tax cuts is lasting and deep. And as Bruce Bartlett points out, the “Starve the Beast” theory—according to which diminishing revenues will force the government to curtail spending—simply hasn’t held up:
Starve the beast theory has been the subject of much recent academic research, all of it showing that there is no truth to it whatsoever. Indeed, the literature shows that the effect is actually perverse; leading to higher spending because the tax-cost is reduced by tax cuts. I provide links to a number of recent academic studies on this point in my Fiscal Times post [Wednesday, July 14].
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