People still think tax cuts are BAD and government spending is GOOD

Larry Kudlow, host of Fox Business’ “Kudlow,” recently discussed the controversial topic of tax cuts versus government spending. The discussion, which featured Forbes Media Chairman Steve Forbes and former Council of Economic Advisers Chairman Kevin Hassett, aimed to explain why some people still believe tax cuts are bad while government spending is good. Despite the ongoing debate, Kudlow and his guests made a strong case for the benefits of tax cuts. Let’s see what they had to say.

Misunderstanding over tax cuts

Kudlow began the discussion by asking why tax cuts are often viewed negatively. He pointed out that Nobel laureates and many economists seem to believe that government spending is inherently good, while tax cuts are bad. This perspective, according to Kudlow, has no basis in practical economic principles. He suggested that the bias against tax cuts is more about control and less about actual economic performance.

Nobel Prize Debate

Steve Forbes has pointed out that the Nobel Prize in Economics often rewards research that aligns with a particular partisan view. He noted that economists who criticize free markets and supply-side economics are more likely to receive praise. This, he argued, distorts public perceptions and policy recommendations, making it harder for alternative economic models, such as those advocating tax cuts, to gain traction.

Reagan’s Perspective

In considering Ronald Reagan’s economic philosophy, Kudlow echoed the former president’s view that individuals are better managers of their money than the government. Reagan’s position was clear: government spending does not create wealth; instead, it redistributes it inefficiently. Kudlow’s contention was that these principles are still relevant, despite the opposition of many contemporary economists.

Data-driven analysis

Kevin Hassett raised a key issue about the importance of data in economic discussions. He criticized the lack of rigorous modeling by those opposed to tax cuts. Hassett argued that empirical data often supports the effectiveness of tax cuts in stimulating economic growth. He cited examples from the Trump administration where tax cuts led to increases in median family incomes, in sharp contrast to the economic performance under President Biden.

Inflation and economic policy

Forbes highlighted the discrepancies in the interpretation of inflation data. It noted that inflation remained low during Trump’s term despite significant tax cuts. In contrast, the current administration’s policies of increased government spending have coincided with a rise in inflation. Forbes said this undermines the narrative that government spending is inherently good for the economy.

The role of government control

Forbes also discussed the underlying desire for control among advocates of high government spending. He suggested that many economists and policymakers prefer a system in which government plays a significant role in the economy. This preference for control often translates into more regulation and less economic freedom for individuals and businesses.

The real impact on families

Kudlow and his guests emphasized the tangible benefits that the tax cuts have brought to American families. Hassett noted that under Trump’s tax policies, the real incomes of average families have risen significantly. This increase in income directly contradicted the narrative that the tax cuts benefit only the wealthy. The data showed that lower-income families also saw significant economic gains.

Government spending and deficits

The discussion also touched on the misconception that tax cuts are the primary cause of deficits and debt. Forbes and Hassett argued that excessive government spending, not tax cuts, causes deficits. They pointed out that government revenues often rise after tax cuts, but these gains are offset by unsustainable levels of spending.

“The blind leading the blind”

People shared their thoughts in the comments: “A classic case of the blind leading the blind”

Another commenter added: “We are used to working for the government. Every financial transaction we are involved in involves a government entity as part of the transaction. Their names are FICA, FITW, SITW, SALES TAX, EXCISE TAX and so on. Our elected representatives consider our money theirs to spend!”

One person simply came to the following conclusion: “People have no idea how the economy really works.”

The future of economic policy

Looking ahead, Kudlow and his guests expressed concerns about the current direction of economic policy. They argued that a return to policies that emphasize tax cuts and reduced government spending could lead to stronger economic growth and greater prosperity for all Americans. The key, they suggested, is for policymakers to recognize the proven benefits of economic freedom and individual initiative.

Empirical evidence

What do you think? Why do some economists and policymakers still believe that government spending is better than tax cuts? How does the partisanship of the Nobel Prize in Economics affect public policy and perceptions? What empirical evidence supports the effectiveness of tax cuts in stimulating economic growth?

For the full story, watch the video on Fox Business on YouTube here.