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Lobbing the stink bomb

Boortz's idea sounds good at first, but that one commenter was right when he said that spending itself must be targeted, and that tax holidays aren't really attacking the root. Leaving borrowing aside for now, there appears to be a misconception that, because the lost revenue would be spent better than government would spend it, and would generate more growth, total tax revenues will not only rise, but they will immediately rise so much that they will exceed the revenue that was foregone.

This notion does not follow from the Laffer Curve. Increasing tax revenues while lowering rates is usually something that happens when people become more productive because they get to keep more of what they produce. This change in behavior is not something that is undertaken lightly and quickly, only to be undone after 5 months. There are times when the Laffer curve theory will operate, but 5-month tax holidays that then expire are not among them. There is no guaranteed quantifiable effect on tax revenues. In other words, the tax holiday isn’t going to immediately “pay for itself.”

Absent spending cuts, all such an ad hoc tax holiday would do is make it tougher for the government to run its day-to-day business. Government is running deficits as it is, and has no cushion, and we also don't want Treasury auction sizes jumping up suddenly to account for this one-off event. Just remember, they already have to borrow is it is, with the tax revenue coming in. Without that tax revenue, things might become unbearably tight, and they might literally be unable to function.

What about Ron Paul? He knew about all the problems and how to fix them. He advocated sound money (encourages saving), small government, no undeclared preemptive foreign wars, and obedience to the Constitution. This program would have, and still can, usher in a new era of freedom and prosperity. But the GOP blew it. They had a chance to be real conservatives and they blew it. They blew it.