Hail to the Liberal Version of the Laffer Curve
Investors Business Daily discovers the new thinking in Obama's economic planning: a liberal version of the Laffer Curve, "which posited that certain tax cuts will pay for themselves by accelerating economic growth."
"One of the most important things we can do for debt and deficit reduction is to grow the economy," [Obama] said, adding that "if there are steps that in the short term may reduce the amount of cash in the treasury but in the long term mean that we're growing at 3.5% instead of 2.5%, then those ideas are worth exploring."…
Obama's argument goes like this: More deficit-financed federal spending today will boost economic growth tomorrow, and that faster growth will throw off more tax revenues. Voila! Federal spending will eventually pay for itself!
It's the liberal version of the Laffer Curve….
This logic finds support from NY Times columnist and Nobel-Prize-winning economist Paul Krugman who wrote in late 2009:
"Spending more on recovery will lead to a stronger economy, both now and in the future — and a stronger economy means more government revenue."
Krugman later wrote that "people like me have been hesitant to make this argument loudly, for fear of being cast as the left equivalent of Arthur Laffer."…
Eh, mebbe. But IBD winds up its house editorial with this set of rhetorical questions:
What do we have to show from Obama's historic "pay for itself" stimulus spending spree? A recovery weaker than any since the Great Depression. A jobless rate that — two years after the recession ended — remains above 9%. Three years of $1 trillion-plus deficits. A debt burden that's climbed more than 40%. And no hope in sight of any of this getting much better.
Now Obama has the temerity to suggest that we apply the same economic medicine all over again, and the gall to argue that it will somehow pay for itself?