I was yesterday morning on CNBC debating Arthur Laffer on supply side economics and the Bush tax cuts. Laffer is the father of the "Laffer Curve", the idea that tax cuts will not increase the budget deficit but would rather be self-financing given the strong suplly side response of labor, savings and investment to tax cuts. George Bush father referred to Supply Side Economics as "Voodoo Economics" when he was running for the Republican Presidential nomination against Ronald Reagan in 1980. Twenty five year later, supply side tax cuts are still Vooodo Economics!

The occasion for this renewed debate today was the news that in the first 8 months of the 2005 fiscal year, the US fiscal deficit has significantly shrunk relative to the first 8 months of the 2004 fiscal year; revenues are up relative to a year ago. For Laffer and other Voodoo economists this is the proof that tax cuts work. The reality is quite different when you consider the history of supply side economics for the last 25 years.