Okay,
shek, I actually followed all that (I labor under the conceit that I'm a purty smart guy
), and I still have problems with it.
For instance, it IS a corrollary that an increase in rates equals an increase in revenue, according to what you're saying. Sure, not 1:1, all other things being equal, but STILL: jack up the rate (but not too high), and see a corresponding increase in revenue. So, why don't we do that when the Federal spending increases? Find that magic number that will equal the deficit, (rate increase times the coefficient of whatever percentage we're likely to lose), and just like that, we're back in the black.
And then we're on a track to stand economic rationality on its head: in those times when economic activity falls and federal spending is going up, we increase taxation to cover our shortfall...and the following year, we have to do it AGAIN, and at a faster rate, because as we go along this road, we're destroying economic activity. And the downward South American death-spiral takes us into an uncontrolled descent into terrain.
I dunno, man; I'm a convinced supply-sider, and I think Arthur Laffer had the right idea: people are rational beings that can be expected to behave in their own economic self-interest when faced with confiscatory marginal rates, and they'll be as creative as they feel they have to be to shelter that last dollar earned.
Also, I'm purty sure that we CAN grow our way into self-financed tax cuts. I mean, look at the way the American economy out-performs those places that have MUCH higher rates (I acknowledge all the other factors that contribute: productivity/work ethic, light regulatory regime, cheap and plentiful capital, etc.), and you can see that growth rates are tracking along with low taxation. Over a span of time, that extra one percent (or whatever) rate-of-growth is going to be DECISIVE in making our economy the 800-pound gorilla, and I am absolutely convinced that it starts with a relatively low rate of taxation. And when you tax THAT behemoth, even at low rates, you get more money than if you'd kept the tax-screws on tight and made certain that we were like some wheezing, sclerotic Euro-state with a rate that is higher, and a economy that was lower as a result.
I guess I need to read more economic theory, but it feels too much like training for a marathon I know I'll never run in: hard work, painful, and ultimately of no lasting value.
