Big debate in the world of conservative Economists. Apparently, President Bush's recent selection of N. Gregory Mankiw as his chief economic advisor is causing a stir. In a text book he wrote, Mankiw attacked Supply Side Economists as snake oil salesmen.
Luckily Bruce Bartlett jumped to his rescue, saying, "Mankiw was simply trying to illustrate the point that sometimes a fad can sweep the economics profession that later turns out to be false. This is indisputably true. Unfortunately, he chose a poor example to make his point. Mankiw acknowledged this fact by purging this section from later editions of his book, the third edition of which is due out shortly.
Yet even in the first edition of his textbook, Mankiw acknowledged that the Laffer Curve is correct in theory -- it simply shows that at a 100 percent tax rate or a zero percent tax rate no revenue is collected. Every economist knows that this is true. But of course, we are nowhere near a 100 percent tax rate -- nor were we in 1981 -- such that one could expect an across-the-board reduction in tax rates actually to raise revenue. Ronald Reagan never said so, nor did any other responsible economist."
So for those who have heard the argument, as I have, that you can lower taxes and the government makes more money, well that argument is just not true.
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