Norman's Blog

The historical evidence indicates that some tax cuts do increase tax revenues and some do not. For example, the 2001 tax cuts did not increase tax revenues but the 2003 cuts did. It can be argued that the 2003 tax rate decreases did more to raise federal receipts than the 1993 tax rate increases even when adjusted for inflation.

John Maynard Keynes wrote,

Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance than an increase of balancing the budget. For to take the opposite view today is to resemble a manufacturer who, running at a loss, decides to raise his price, and when his declining sales increase the loss, wrapping himself in the rectitude of plain arithmetic, decides that prudence requires him to raise the price still more -- and who, when at last his account is balanced with nought on both sides, is still found righteously declaring that it would have been the act of a gambler to reduce the price when you were already making a loss.

US Federal Receipts (in millions)
Current Dollars			Chained 1993 Dollars
Fiscal Year	Receipts	% Change	Inflation Adjustment	Adjusted Receipts	% Change
1993	1,154,335	--	1.000	1,154,335	--
1994	1,258,566	9.03%	0.980	1,232,801	6.80%
1995	1,351,790	7.41%	0.960	1,298,329	5.32%
1996	1,453,053	7.49%	0.939	1,364,920	5.13%
1997	1,579,232	8.68%	0.926	1,462,663	7.16%
1998	1,721,728	9.02%	0.920	1,583,608	8.27%
1999	1,827,452	6.14%	0.903	1,650,763	4.24%
2000	2,025,191	10.82%	0.881	1,784,785	8.12%
2001	1,991,082	-1.68%	0.868	1,728,707	-3.14%
2002	1,853,136	-6.93%	0.853	1,581,195	-8.53%
2003	1,782,314	-3.82%	0.838	1,494,342	-5.49%
2004	1,880,114	5.49%	0.816	1,533,947	2.65%
2005	2,153,611	14.55%	0.788	1,697,688	10.67%
2006	2,406,869	11.76%	0.777	1,869,664	10.13%
Inflation
Date	PCE Value		Inflation Adjustment		Inflation
Oct 1993	73.780		1.000		--
Oct 1994	75.322		0.980		2.09%
Oct 1995	76.818		0.960		1.99%
Oct 1996	78.544		0.939		2.25%
Oct 1997	79.660		0.926		1.42%
Oct 1998	80.215		0.920		0.70%
Oct 1999	81.677		0.903		1.82%
Oct 2000	83.718		0.881		2.50%
Oct 2001	84.978		0.868		1.51%
Oct 2002	86.469		0.853		1.75%
Oct 2003	87.998		0.838		1.77%
Oct 2004	90.430		0.816		2.76%
Oct 2005	93.594		0.788		3.50%
Oct 2006	94.979		0.777		1.48%

Sources: Federal Receipts, Federal Reserve Economic Database and PCE: Chain-type Price Index, Federal Reserve Economic Database

President George W. Bush



President William J. Clinton



President George H. W. Bush



President Ronald W. Reagan



It is good to have Republicans in office when recessions occur because they are ideologically better suited to facilitate recoveries.

In 1995, the Democratic President stated:

Now, I've studied the arguments and the evidence for and against a minimum wage increase. I believe the weight of the evidence is that a modest increase does not cost jobs, and may even lure people back into the job market.

This is the Card-Krueger lie where science is supplanted by politics. Scientifically, an increase in the minimum wage increases unemployment and increases inflation, ceteris paribus. Note the words "ceteris paribus!" If the minimum wage is increased and unemployment and/or inflation do not also increase, it is attributable to offsetting variables. It is fallacy to conclude the causal relationship does not exist.

Be realistic about the minimum wage. Given inflation, the minimum wage, in and of itself, does nothing to elevate the standard of living of minimum wage earners. However, it is the catalyst for other variables changing to mitigate adverse effects. Pressure is brought to bear upon businesses to gain efficiencies and economies of scale and/or scope.

Perhaps, a better way to help low wage earners is the Earned Income Tax Credit. It does not subsidize teenage workers of wealthy families.