A model for mak­ing tax cuts work

Hard­ing and Coolidge avoided higher deficits by cut­ting spend­ing

The Washington Times Daily - - OPINION - Ivan Eland is a se­nior fel­low with the In­de­pen­dent In­sti­tute.

on eco­nomic growth, large numbers of our po­lit­i­cal lead­ers keep on propos­ing the same pol­icy and hop­ing for a dif­fer­ent re­sult.” Mr. Lof­gren is ab­so­lutely right but may be giv­ing politi­cians credit for naivete rather than for com­ing up with a clever, if ir­re­spon­si­ble, method of win­ning votes.

Such fake tax cuts — with­out a cor­re­spond­ing re­duc­tion in govern­ment spend­ing — may not be achiev­ing eco­nomic growth be­cause they gen­er­ate yawn­ing bud­get deficits, thus creat­ing mas­sive fed­eral pub­lic debt (now al­most $20 tril­lion) that drags on the econ­omy. If govern­ment spend­ing is not cut, some­one needs to pay for the tax cuts some­time. Taxes need to be raised later, as Ronald Rea­gan did in six years of his eight-year pres­i­dency. In the mean­time, the govern­ment needs to bor­row money to fund the deficit, thus ratch­et­ing up costs of in­ter­est paid. Fi­nally, in some cases, to get buyers for its debt, the govern­ment prints money — the worst op­tion — thus lead­ing to in­fla­tion and sig­nif­i­cant dis­tor­tions in the econ­omy.

As usual for Repub­li­cans, Mr. Trump, dur­ing his cam­paign, and con­gres­sional Repub­li­cans have talked a lot about tax cuts and large de­fense-spend­ing in­creases — just as Rea­gan did and Ge­orge W. Bush did by run­ning the first war in Amer­i­can his­tory at the same time he pro­mul­gated a huge tax re­duc­tion — but have not spent much time ad­vo­cat­ing the slash­ing of fed­eral spend­ing. In fact, Mr. Trump has promised not to cut en­ti­tle­ments — by far the largest part of the fed­eral bud­get. If these fa­mil­iar poli­cies are fol­lowed, the $500 bil­lion deficit that Mr. Obama has left will bal­loon — as deficits did dur­ing the Rea­gan and Bush ad­min­is­tra­tions.

How­ever, Mr. Trump, not be­ing a usual politi­cian, ran against the cor­rupt vote-buy­ing gim­micks of both par­ties — and the vot­ers re­sponded. In­stead of the Rea­gan-Bush model, Mr. Trump and the Repub­li­cans should adopt the Warren Hard­ing-Calvin Coolidge route to tax cuts. Those pres­i­dents be­lieved in ro­bust, old-fashioned spend­ing cuts, thus en­abling them to also slash taxes while at the same time re­duc­ing the then-sub­stan­tial na­tional debt left over from World War I. “To make Amer­ica great again,” Mr. Trump and the con­gres­sional Repub­li­cans should use the hon­est Hard­ing-Coolidge ap­proach rather than the usual ir­re­spon­si­ble Ronald Rea­gan- and Ge­orge W. Bush-style chi­canery.

IL­LUS­TRA­TION BY HUNTER

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