It’s good to see that Republican presidential contenders are focusing on supply-side economics as a pro-growth strategy for their campaigns and presumably, for their presidential vision if elected.
The Wall Street Journal’s Kim Strassel tells the story in her “Tax Talk” column today. Having interviewed the “Big Three” candidates on CNBC’s Kudlow and Company, I agree with Ms. Strassel’s assessment that Mayor Giuliani and Governor Romney have developed the best tax strategies so far. Senator McCain remains a distant third.
Incidentally, Steve Forbes’ endorsement earlier this week of Rudy Giuliani is a significant development. Both Rudy and Romney have strong supply-side tax advisors in their camps. And if economist Kevin Hassett can convince Sen. McCain to slash corporate tax rates, that would surely give the Arizonan a much stronger economic growth platform.
Also noteworthy is Alan Reynolds’ recent piece that argues tax revenues as a share of the economy actually increased during the JFK, Ronald Reagan and George W. Bush tax rate reduction periods. Revenues also rose following Bill Clinton’s second term tax cut package that included a reduction in the capital gains tax rate.
Right now in Washington’s budget process, Republicans should be arguing that any revenue shortfalls can be made up by reducing tax rates—or at least holding them down to their current levels.
Tax receipts have absolutely boomed in the aftermath of President Bush’s 2003 tax rate reduction package. That’s a fact. As a consequence, the budget deficit has fallen substantially. Moreover, at lower marginal tax rates there’s a good chance the budget will be balanced in the next year or two, despite chronic overspending.
I wish the presidential contenders would talk more about all this. Lower taxes make good economics and good politics. But the fact they are all searching for a supply-side tax strategy bodes rather well for a Republican comeback in 2008.
The older I get, the more militant I become on this subject. Lower tax rates do expand the economic pie. Lower tax rates do boost revenues. Art Laffer had it right, and he’s got twenty-five years of pro-growth evidence to back him up.
The tax cutters were right. They won.