And now comes the really fun part. On Monday Nicolas Bray wrote to me asking if I had caught OMB Director Mitch Daniles on Charlie Rose on Friday August 16. Charlie Rose tried to pin him down, and asked him the question: "How much do you believe the tax cut will contribute to the [long run] deficit?"
Mitch Daniels's answer? Zero. "If [the tax cut] contributes to greater economic growth, it will be a positive factor.... Surpluses don't produce good economies, good economies produce surpluses..."
I know of no analyst anywhere in the world whose run of the numbers suggests that the Bush 2001 tax cut--badly designed from a supply-side point of view--will induce enough economic growth to result in no loss of revenue. I know that there is no budget analyst within OMB, the Treasury, or the Congressional Budget Office who believes this.
Yet Mitch Daniels's dropping of the share of the deterioration in the deficit over the next ten years attributable to the 2001 tax cut from 50 percent (a rough consensus estimate) to 15 percent (in the now 'retracted' OMB July 12 press release) to zero (last Friday) has attracted remarkably little attention.
Take it away Mickey...