Responding the CFRB's praise of the House Budget proposals

Spending is not what put the budget out of whack. The tax cuts enacted in December 2017 did that. In two years, these sunset automatically. Doing so will grow the economy, as tax cuts do not result in investment in plant and equipment, which is an element of GDP. Putting money into speculative investment is NOT. Indeed, such tax cuts hurt the economy by decreasing GDP as a percentage of total economic activity.

Now is the time to throw the Peterson Foundation under the bus and recognize necessity. Nothing else is responsible pubic finance or good economics. Supply side economics simply does not work if investment in speculative assets is considered savings rather than an element of GDP. The Laffer Curve is correct, however. There is a Laffer Optimum, although the Tax Policy Center has identified it as in the mid-60th percentile - not one-third of it. 

The reason the economy shifted from 2% growth to 3% growth under Obama (as well as under Clinton) was because taxes went up for the rich. Every time they were decreased, a speculative bubble resulted, leading to the Savings and Loan Crisis, the Tech Boom and Bust and the 2008 Great Recession (which was actually a depression because it was asset values that decreased below debt load - not a simple drop in growth.

Any tax rate above 67% decreases collections, but in doing so it stops wage theft by the richest 20% of households at the expense of the working class. When the top marginal rate was 91%, wages were in line with productivity. This is because there was no incentive to cut labor costs in order to garner a bonus - as the bonus would be taxed away.

In 1965, the Kennedy/Johnson tax cuts gave the CEO/Donor class a reason to cut labor costs. Labor piece was destroyed. Unfortunately, when the gold standard and wage and price controls were ended by Nixon, cost of living adjustments were done on an equal percentage basis, rather than an equal dollar raise for every employee. This caused the spread between the bottom 90% of households (the level that kept up with inflation) and the top 10%. IRS data show that Adjusted GDP for each side of that line are approximately equal. 

Inflation in the economy follows the middle dollar, not the median income. 

The best curative for inflation is to increase taxes and limit wage increases in the public employee and government contractor sector to equal dollar raises, while giving the same wage bump to lower wage workers. This will increase affect private sector wages as well and limit inflation as the average dollar in the economy makes its way down the income scale.

If spending is to be cut, then lowering executive pay in the public sector is the place to do so.