Lazear on Debt, Taxes and the Economy

Ed Lazear pissed-off a lot of people on friday, with his testimony before the Senate Budget Committee. Although he admitted that, "we do not think tax cuts pay for themselves," most of his testimony seemed to mask this simple fact. He argues that the tax cuts were good for the economy and did not burden the country with debt.

The big, fat, white elephant in the middle of his testimony is his implicit claim that the tax cuts are temporary, with only short-term effects. Lazear told the senate to control spending (he failed to mention that Iraq would be a good place to start) but did not mention that the tax cuts exacerbate the situation.

It's not that Lazear is wrong in everything he said; he was just obscuring some of the more important facts. For example, It is true that nominal tax revenues were 9.4% higher in 2005 than in 2000, but PRICES WERE 12.7% HIGHER. (Hat tip: Angry Bear)

For more information on how the Bush administration fudges its debt numbers, see CalculatedRisk.

Posted by Peter.