The White House announced yesterday that the 2008 budget deficit would be smaller than originally projected, as will the 2007 deficit. The reasons: 1) the economy is strong and 2) tax cuts stimulate taxable economic activity.
We’ve know that that tax cuts increase federal revenue (to a point) since John F. Kennedy explained it in 1961. The Laffer Curve was the final word on the subject and should have earned Arthur Laffer the Nobel Prize for economics.
Ed Morrissey is worried the Democrats in Congress will raise taxes and drive the deficit up. They’ll try, no doubt, but tax increases do not fly during election years. As Brent Baker points out at NewsBusters, the press is still trying to get Bush to commit to tax increases–proof that liberals have a pathological fixation on raising taxes that defies all economic reason.
I hope Giuliani and Fred Thompson continue to explain the relationship between marginal tax rates and federal revenue. They have done a great job so far. McCain and Romney might think like Giuliani and Thompson, but they don’t communicate economic reality nearly as well. The next president must connect with the American economic mind the way Reagan did. And he must not listen to the likes of Bob Dole when they come to ask for a tax increase.