Jon Chait, in response to what he calls “an extremely familiar screed” by Allan Meltzer, uncorks an extremely familiar screed of his own — familiar because Paul Krugman has made the same exact argument before. It goes something like this:

Republicans were making this point in early 2009, and in support of the Bush tax cuts in 2001: Tax cuts must be permanent in order to have any stimulative power. If the tax cuts are temporary, people will just save them. Aside from the truth of this proposition, which is questionable but not totally wrong, just consider the logic on its own terms. The argument is that you have to enact permanent tax reductions in response to temporary economic dislocations. Every time the economy stalls — 2008, 2001, 1990, 1982, etc. — conservatives think the government should cut taxes. And you can’t raise taxes in between, because that’s the same thing as making the tax cuts temporary. At some point, revenues are going to hit zero. Maybe conservatives would approve of such a solution. But what do you do when the next recession comes, if there are no more taxes to cut?

This is a reductio ad absurdum, and not a very effective one. I don’t want to speak for Meltzer, but when I’m making similar arguments, what I mean by “permanent” is that A) the tax relief should come in the form of rate cuts, not rebates, and B) the rate cuts should not be packaged with expiration dates, if possible. Notice that my definition of permanent does not include C) “and then we should have a constitutional amendment prohibiting Congress from ever raising taxes again.”

Now, Chait might respond that things such as Grover Norquist’s tax pledge make “C” the operative position of many conservatives anyway, lending some credibility to his over-literal interpretation of “permanent.” But Norquist’s tax pledge is based on the view that government is currently too big, and that Congress should cut spending before it raises taxes any further. I’m sure there is a point at which even Grover would say that federal tax rates are fair, and I’m sure that point for most conservatives would come well before revenues hit zero. To argue otherwise is just silly. I would have preferred to see Chait get into the “questionable but not totally wrong” truth underpinning the permanent income hypothesis, but that would have required more effort and less snark.

Chait also writes:

Moreover, if you actually implemented the permanent tax reduction stimulus plan, at some point you’ll have to cut spending to match the reduction in revenues. Won’t consumers save their money in anticipation of the spending cuts? I mean, if they’re rational enough to anticipate a future change in federal tax policy, they should also be rational enough to anticipate that the government is going to cut their Social Security benefits or whatnot.

“Won’t consumers save their money…” Maybe. But this shouldn’t be a huge problem if spending cuts are coupled with tax-rate cuts. The importance of cutting tax rates, in terms of economic stimulus, it not just that it gives people more money to spend. The stimulus comes from the incentive effects of letting people keep more of the money they earn. If people think they are going to need to work harder and save more because the government is going to cut their Social Security, and the government is simultaneously letting them keep a higher percentage of each marginal dollar, eliminating taxes on their investments and reducing taxes that create a drag on their business activities, how could that not be a net plus for economic growth?