Peter Robinson’s Questions
First of all, let’s remember that I didn’t come out against Rep. Paul Ryan’s tax plan. I’m not saying I’d vote against it if I were a congressman. I merely said that I’d prefer to make some changes.
Second, on the question of political circumstances: I’m not deeply committed to this view, but it does seem to me that there is currently a greater appetite among the public for tax reform than for tax cuts. And with most Republicans bragging (especially this week) about the decline of the deficit, it doesn’t strike me as an auspicious time to be talking about increasing it by hundreds of billions of dollars.
Third, on the idea that “the only effective way to cut spending [is] to cut taxes first”: Let me divide that into theory and practice. Friedman’s theory was that federal spending had to equal federal revenues plus the maximum politically acceptable deficit. Reduce revenues, and you’d reduce spending too. The theory made sense so long as the maximum politically acceptable deficit was an independent variable. But if in fact the effort to cut taxes increased the political system’s tolerance for deficits, then spending could go up. And it’s easy to see how cutting taxes could make deficits more acceptable. As for practice: The last decade has not been kind to the idea that cutting taxes would restrain spending.