U.S. Embassy Report on Iraq -- Not So Upbeat

[Xiahou]

Ah, more voodoo economics. Takes me back to the days of Ol' Ronny Reagan. But I guess I'm dating myself.

To make such a contentious argument, you'll have to provide some proof of the following (if you are implying a causal link between tax cuts and expanding goverment revenue):

1. That tax revenues have grown as a direct result of the tax cuts, and not just natural economic cycles.

2. That the growth in tax revenues has been enough to counterbalance the trillions of dollars the government has lost in revenue through the tax cuts themselves.

I doubt you will be able to prove either.

1. Ill have to remember that one next time global warming comes up. Seriously though, I can't believe you dont see that tax cuts can spur economic growth. Here's a story from IBD that outlines the difference in US tax policies vs other countries- pay particular attention to the pretty chart.

Right now, conditions are very positive. But data show the world is already overtaxed. As a matter of efficiency, countries perform best when government's tax take is relatively small — about 20% of GDP. Above that level, economies start to suffer. Repeated studies bear this out.

Perhaps the most famous, by Harvard economist Martin Feldstein, found that high rates of taxation cost countries more than $1 in output for each dollar of added taxes imposed. Likewise, World Bank studies of dozens of economies going all the way back to 1983 find pretty much the same thing.

In Europe, the average tax take as a share of GDP — the most transparent measure of taxation — is 39.3%. That's down from 41.7% in 2000. The U.S., by comparison, was at 25.4% of GDP in 2005. But following recent tax hikes in Germany and Britain that have yet to be fully felt, the EU's rates might soon rise.

Moreover, the gap between European rates and U.S. rates is widening. This in large part explains the disparity in economic performance (see chart).

2. This one is easy- as Ive said, the government is now taking in more revenue than it did pre-cuts. If the revenue growth didnt offset the losses from the tax cuts, revenue wouldnt have grown would it?- it wouldve shrunk.