A history lesson: Do tax cuts pay for themselves?

‘It’s not just economic theory but economic history. … The bottom line is we will be able to fill any deficit hole with additional revenues. And we basically saw the same during the Reagan tax cut, frankly the Kennedy tax cut. You can even go back to the Coolidge tax cut. We will be able to raise more revenues,” Rep. Jeb Hensarling, R-Texas, told Bloomberg News in November about a proposed “trigger” to stem tax cuts if the budget deficit unexpectedly widened.

Hensarling, chairman of the House Financial Services Committee, dismissed the trigger as a “uniquely bad idea” because it would leave businesses uncertain about their tax rates. He insisted that the tax changes engineered by Calvin Coolidge, John F. Kennedy and Ronald Reagan proved that big tax cuts can pay for themselves.

He said that if a deficit widened, it could be handled with spending cuts, but he said he was not worried. “If I thought that this would exacerbate the deficit, I would not support it,” he said. But the economic growth that would be created “will be more than enough to make up the static $1.5 trillion [deficit] over 10 years that this is being estimated.”