From the by John F. Cogan of the Wall Street Journal:“My analysis of federal budget data shows that the chronic federal budget deficits since the 1950s are due to the federal government’s failure to raise tax revenues required to finance its spending on state and local activities.”
The basic premise of this article is faulty. Therefore, the conclusions are false. The authors mind-set, his false premise, is based on increasing tax revenue to support government spending.
The opposite is true. Government should restricts its spending to a number less than its tax revenue. And the savings from lowered spending should be used to pay down the debt.
The author used static economic formulae to arrive at his conclusions: higher taxes equals higher tax revenue. The problem is that the tax payer will react negatively to increased taxes.
A dynamic model better suits the reality, it accounts for the effects, both seen and unseen, of tax hikes. For instance, Trump’s tax rate curs actually increased federal revenues. That is due to increase economic activity in the private economy.
Economics is the study of human nature. Denying the obvious reality is not any way to run monetary or fiscal policy. Economists like this haven’t learned a single lesson from the total failure of MMT (Modern Monetary Theory) over the past 16 years.
Jay Davidson is founder and CEO of a commercial bank. He is a student of the Austrian School of Economics and a dedicated capitalist. He believes there is a direct connection between individual right and responsibility, our Constitution, capitalism, and the intent of our Creator.
The article can be found here: