Answer to "We can't afford stimulus because of the deficit"

[Kurt_and_Hunter]

Economic growth is as important as tax rates in determining revenues. (15% of $2 million is more than 25% of $1 million, etc.)

And who should understand this phenomenon better than the Republicans? It's the basis of generations of Republican tax policy arguments. (Laffer curve etc. It is true that tax cuts are stimulative. And also true that increased activity increases tax revenues. Where the pugs go wrong is in lying about the proportions... tax cuts do not stimulate the economy nearly enough to increase net revenue, which is the usual pug claim. There's a good chart at the first link where you can see the effect of the Bush tax cuts on YoY revenue change.)

But when politically convenient for the wing-nuts the deficit suddenly becomes a static function of government outlays with no dynamic revenue benefit from increased economic activity. (They weasel this by saying that unlike tax cuts, government spending cannot increase taxable activity--a statement so wildly wrong its in the "big lie" category. How much taxable activity has the federal highway system indirectly generated over time?)

Yes, the deficit is ballooning. And yes, were are spending more. But we are also taking in a lot less money because the economy sucks, and we are spending more money precisely to make it suck less.

The U.S. federal budget deficit rose to a record $956.8 billion in the first six months of the fiscal year ... the Treasury Department reported Friday.
...
In March, the deficit widened to $192.3 billion from $48.2 billion in March 2008. Outlays rose 41% to $321.2 billion from $227 billion, while receipts were off 27.9% compared to March 2008.

For individual income taxes, receipts were off 27.3%.

For Social Security payroll taxes - Employment and General Retirement (off-budget) - receipts were flat.

For corporate income taxes, receipts were off 89.6% (from $32.6 billion in March 2008 to $3.4 billion in March 2009).

http://www.calculatedriskblog.com/2009/04/federal-tax-receipts-off-28-percent-yoy.html

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B61748931%2DFC53%2D4C66%2D8708%2D2F000F1906ED%7D

NOTE: Imagine what would happen with a balanced budget. Federal revenue is down 28%. Some troglodytes think that means we need to cut the federal budget by 28%. What an awesome idea... the solution to swelling unemployment is to lay off a few million more people! The solution to collapsing manufacturing is to cancel government contracts! That will fix everything.

[On the Road]

1. That is Ironic --

The Laffer curve to the rescue!

I completely agree with the point, however. Nothing in the Obama deficits comes close to the prospect of an extended depression.

[Kurt_and_Hunter]

3. Obama should just start calling his deficit projections "dynamic scoring" and let Gingrich choke on ...

Every time the CBO said tax cut X would not actually increase revenues Gingrich would shriek that the scoring wasn't dynamic enough.

[Cant trust em]

2. I think it's interesting that republicans use the Laffer Curve alone as reasoning

The existence of the theory is enough, not practical application (ie, where the line of optimization occurs).