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Giuliani's Fiscal Insanity: Not Just A Charade

Remember when Rudy Giuliani made the off-the-reservation loony claim that if we were to cut taxes, we would have to fix the resulting hole in the budget by balancing it out with more tax cuts? (Crazy as it sounds, of course, it's just a logical inference from the supply-side argument that lower taxes always mean more revenue.) Everyone assumed Giuliani had misspoken. When he insisted he meant what he said, everyone assumed it was just gratuitous, empty pandering to the economic right. As Avi Zenilman found out, even conservative economists are unwilling to associate themselves with this sort of lunacy.

But now it turns out Giuliani has actually proposed a tax plan that, indeed, seems to balance out tax cuts with more tax cuts. He envisions cutting just about every tax in the book (or, at least, just about every tax in the book that rich people pay). University of Michigan econ professor Matthew Shapiro, in the typical diplomatic fashion of academia, notes that "It's not clear how this would move the budget toward balance," which is sort of like saying it's not clear how Sherman's march through Georgia moved the Confederacy toward victory.

By contrast, erstwhile budget hawk John McCain's plan to "only" extend all the Bush tax cuts and get rid of the AMT is ridiculed by James Pethokoukis as "three yards and a cloud of dust." (Should serve him well as the race moves into Big Ten country, I suppose.) The gap between what Republican politicians are proposing and what any objective analysis says taxation levels will have to be in the coming decades, even if fairly steep entitlement cuts are made, is nothing short of stunning.

--Josh Patashnik