Taxes No Budget Cuts Si

There's a good article in the Wall Street Journal today. The author, Peter Wallison, makes the point that increasing taxes to reduce deficits will ultimately lead to slower economic growth, which will lead to higher deficits, since slower economic growth results in less taxes being collected. It's easy to understand, really. People have less to spend because they pay more in taxes. The economy slows because they spend less. With less economic activity, companies receive less revenue from slowed commercial transactions. So with fewer individual transactions (people spending less) and lower company revenues (people spending less), tax collections go down. From fewer individual transactions, you get lower sales tax revenue. From reduced company sales, you get reduced corporate revenue, therefore corporate taxes on that reduced revenue.

So now you've got reduced taxes flowing into the government coffers, which means their revenue goes down. And, of course, unless they immediately cut their spending - which they don't do - the difference between what they spend and what they take in grows and you wind up with a deficit, which gets paid by the government borrowing money, which increases - yet again - the national debt.

Why is this all so hard to understand? Why does it have to constantly be explained by people like Wallison?

I do have one objection to the article, though. While the point about higher taxes leading to slower growth leading to lower revenue leading to higher deficits, etc. is all well and good, and while the argument can be made that Democrats seem to be the big offenders here, you've got to remember that deficits will also increase when you spend more and don't increase taxes - and don't cut budgets (expenses). And that has been a pretty consistent habit of Republicans.

Of course, the American Enterprise Institute - of which Wallison is a "senior fellow" - tends to support Republican causes.