Now that you’ve ruled out a couple of absurd cases, Ramesh, may I ask you to address Friedman’s point?
Right up until the early Eighties, as you know, Friedman spent a lot of time arguing that the great imperative was to reduce federal spending. Then he changed his view, deciding that, on the evidence of all the decades since the New Deal, the only effective way to reduce spending was to cut taxes first. (In effect, he endorsed the Reagan approach over the Thatcher approach–Mrs. T., you’ll recall, insisted on cutting spending before cutting taxes, with the result that she never got around to the deep tax cuts she had once hoped to enact. Reagan cut taxes deeply from the get-go.) There’s a darned good case to be made, it strikes me, that Friedman would have endorsed the House conservatives’ tax cut plan on the very same grounds.
Which brings me to a couple of questions:
As you write below, you’re “not sure, in the present political environment, [that] it makes sense to promote a tax cut without [coupling it to] spending cuts.” How come? What is it about the present environment, exactly, that makes tax cuts a bad idea? Would you have opposed Reagan’s tax cuts in 1981? How would the present environment need to change before you could support the House conservatives’ plan? Can you conceive of any political environment (any relevant environment, so please don’t tell me it would work just fine in Liechtenstein) in which the announcement of big spending cuts wouldn’t doom, more or less instantaneously, any measure to which it was coupled?
I’m not attempting to be contentious here–only a fool would taunt the Master of the Intellectual Ginzu Knives. I’d simply like to hear you expand on your position.