Who, Indeed?

Larry Kudlow defends the Laffer Curve against its critics: "Now, the Congressional Budget Office would try to argue that these revenues are lower than would have been the case if taxes had not been cut. But who’s to say? Economic growth would’ve been slower and hence revenues without tax cuts might have been lower." Who, indeed, other than, perhaps, the staff economists at the Congressional Budget Office who are trained to make such calculations. One can try to argue, I suppose, that it's per se illegitimate to mount any kind of argument about historical counterfactuals. This will, however, render it impossible to make any claims about causation.

There is, in fact, a method available for teasing out the answer to this riddle. We look at the actual level of tax revenue. Then we look at what the level of tax revenue would have been under higher tax rates assuming no growth effect. Then we look at how much lower growth would have had to have been for revenues under the counterfactual scenario to have been lower than revenues under the action scenario. Last, we must ask ourselves if we are in possession of any plausible account of why the higher-rate path would have generated such low growth. Neither the CBO nor any other credible individual or institution has produced such a model, which is why we're left with Kudlow's hand waving and "who's to say?" nonsense.