CAMBRIDGE – The United States is famous for its ability to innovate. Aspiring fiscal conservatives around the world thus might be interested in learning four tricks that American politicians commonly use when promising to cut taxes while simultaneously reducing budget deficits.
These are hard promises to keep, for the simple reason that a budget deficit equals government spending minus tax revenue. But, each of the four tricks has been refined over three decades. Indeed, they first acquired their colorful names in the early years of Ronald Reagan’s presidency: the “magic asterisk,” the “rosy scenario,” the Laffer hypothesis, and the “starve the beast” scenario. As shop-worn as these tricks are, voters and journalists still fall for them, so they remain useful tools for anyone posing as a fiscal conservative.