Monday, June 19, 2006

Macro Economics 101

The editors of National Review make some interesting points about the deficit.
There is a lesson here, and it is vindicatory of the central claim of supply-side theory: Easing the national tax burden spurs economic growth, significantly mitigating the revenue loss that results from tax cuts. The national economy is a dynamic system, and it responds to the incentives and disincentives imposed on it by government policies. When businesses and individuals are allowed to keep more of what they produce, they produce more. And when investors are allowed to keep higher returns, they invest in more productive endeavors. This boosts GDP, which in turn boosts tax revenues.
A rising tide still does lift all boats - no matter how the Democrats will try to argue otherwise. (I'm always fascinated that today's Democratic Party distances itself from some of JFK's best quotes.)

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