1. “Not paying for tax cuts.” Over the past week, I’ve heard the rumblings of this recurring meme of the left, which is apparently being dusted off for another gimpy trot around the racetrack. Chris Wallace pressed Mike Pence (R-IN) on it on Fox News Sunday on the 18th, asking him why Republicans insist this summer on paying for the extension of unemployment benefits (instead of assuming it as debt), but didn’t care if the Bush tax cuts were “paid for.”
The answer is short and simple: because these two situations are not the same thing. Unemployment benefits are an expenditure of the government. Tax rate cuts are not. The government either taxes us by a higher rate or taxes us by a lower one, but it does not “own” a certain absolute cash flow, nor is a reduction in the tax rate equivalent to “spending” part of that cash flow.
This is validated in practical, empirical terms as well as theoretical ones. Cutting tax rates increases the absolute amount of revenue. Cutting the tax rate is not cutting the government’s income, and it is certainly not increasing the government’s spending.