I think the way that McCain may well be able to connect the two schools of economic thought, supply side and budget balancing, is to look at what he has said would be his primary priority: restraining federal spending. He has acknowledged that he was wrong to believe that the Bush tax cuts (and previous tax cuts) led to reduced revenues for the Federal government. Clearly, at least in the past 50 or so years, the U.S. has been on the side of the curve where cutting taxes results in increased economic activity which results in greater tax receipts for the Federal government. The problem, as Senator McCain has repeatedly noted is in the Federal government's insatiable appetite for said revenues and Congress's inability to stop the growth in spending. If non-military spending had remained static, adjusted for inflation, since 2000, we would not be running much if any budget deficit.
In short, you favor a lower and less regressive tax regime which favors investment and wealth creation, while being hawkish on restraining government spending. Of course, two huge items in the Federal budget which McCain or his opponent must reconcile are the (a) continuing drain of Iraq, and the (b) exploding costs of SS & Medicare/Medicaid. But the two philosophies can be reconciled if McCain is serious about curtailing Federal spending and he can deal with the War and Entitlements.
[Update]: I recongize that the evidence overwhelming suggests this reader's statment about the Laffer curve is false, but I imagine McCain may make this arguement in the fall and therefore thought it was worth posting. I should have made this clear.
As another reader writes:
The reader appears to be claiming that a reduction in tax rates will result in increased tax revenue. The statement that we are on the right side of the Laffer curve, where cutting taxes results in increased tax revenues, is blatantly false and not supported by any data.
Economic studies have pegged the maximum revenue generating point of the Laffer curve as somewhere around a 65-80% tax rate, substantially higher than today. Cases of countries where the tax rate was on the right side of the Laffer Curve include Sweden, when at one time they had a 90% marginal tax rate.
Another dissent to this dissent is above.
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