...I saw this morsel and had to pounce on it. It's from a New York Times article profiling Federal Reserve Chairman Ben Bernanke's warnings to Congress about the long-term funding status of Social Security and Medicare. Bernanke drops a tidbit on an unrelated story: the relationship between tax cuts and tax revenues.
Asked by Republicans to echo their view that tax cuts lead to increased revenues, Mr. Bernanke said that tax cuts spur economic growth but that they “usually do not pay for themselves” by generating more tax revenue than they drain from the Treasury.
See, in recent months, conservatives have been talking up the fact that the U.S. budget deficit came in much lower than expected for 2006, as big gains in corporate profits and personal income meant that tax receipts swelled, even with lower tax rates. To many, this short-term phenomenon is proof that tax cuts pay for themselves by stimulating economic growth. Bernanke's comments help remind us that this axiom packs about as much intellectual credibility as, say, intelligent design.
