An absurd argument rears its ugly head

I was naive enough to believe that massive deficits created by massive tax cuts would make it impossible for any serious person to ever argue again that tax cuts can pay for themselves. Alas, the Bush’s budget director is not a serious person.

Bush advisers argue that he is tackling problems long ducked by other presidents and that his solutions will pay off in the long run. Joshua B. Bolten, director of the White House Office of Management and Budget, predicted last week that making the Bush tax cuts permanent could have positive economic consequences that would mitigate their costs.

That sounds a lot like Bolten is arguing that tax cuts will spur economic growth, which will increase government revenue, thus “mitigating” the costs of the tax cuts. In other words, it’s the same old “tax cuts pay for themselves” nonsense that conservatives were supposed to have abandoned.

A couple of years ago, before reckless tax cuts for millionaires generated the largest budget deficits in the history of the world, the “pay for themselves” tack was all the rage. Bush used it, as did Dick Cheney, Ari Fleischer, and Tom DeLay, among others.

Of course, it’s absurd.

This belief is one of the most powerful and enduring myths in public finance. No reputable economist — liberal or conservative — has ever shown that tax cuts pay for themselves. The assertion that tax cuts pay for themselves is little more than wishful thinking, and is rejected by virtually every serious economist and budget analyst.

No less than N. Gregory Mankiw, the man Bush hand-picked to lead his Council of Economic Advisors, called the notion of tax cuts paying for themselves an example of “fad economics,” pushed in the 1980s by “charlatans and cranks.”

So, Mr. Bolten, want to try this one again?