Now this is a good line

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From James Surowiecki's piece in the New Yorker on supply side economica(þ Matthew Yglesias):
But, while Republicans still talk a good game about the need for spending discipline, in practice it matters far less to them than tax cutting. After all, if tax cuts pay for themselves, then there's not much reason to worry about restraining government spending--we can afford it all. In fact, if government spending grows too big, you can cut taxes again to pay for it.



Arthur Laffer was a right-wing supply side economist. He made a nice observation about revenue and taxes: sometimes changing the tax rate will move revenue in the same direction, and sometimes it will move revenue in the opposite direction.

The proof of this resembles the Intermediate Value Theorem from calculus: First observe that there are tax rates that bring in the same revenue (ie. 0% tax and 100% tax), then observe that points in between those two provide more revenue.

Hence, sometimes lowering taxes increases revenue, and sometimes it reduces revenue. The idea provides a theoretical curve on a graph with Tax Rate on the x-axis and Revenue on the y-axis. This is called the Laffer Curve. Economists can argue about where the peak of the curve resides.

Even though the concept is pretty fundamental in Reagonomics, Republicans are happy to ignore it. It plays better to their constituency to simply pretend that lowering taxes ALWAYS increases revenue. It's a much more compact and accessible message than the more complicated reality.

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