[frikskit]

Redo your analysis with something less absurd than 8%. For example 4.5% and you see no improvement in 100 years. 5% growth and it takes 59 years.

Historically major tax cuts in the US increased GDP growth by -1 to 1.5%.

You bring up a good point but in all realistic scenarios it actually misleads.

[AnthonyMouse]

The actual numbers depend on the state of the economy, but you can't just lower the one without considering the others.

Historically "major tax cuts" were actually very small:

https://fred.stlouisfed.org/series/FYFRGDA188S

These were tax cuts on the order of 1-3% of GDP, so of course the effect on GDP growth was similarly muted.

Meanwhile the baseline level of recent US GDP growth isn't 4%, it's more like 2.5%, making a 0.5% increase much more significant for such a small tax cut, so it's not absurd that a hypothetical doubling of the growth rate could result from a hypothetical 15% of GDP reduction in taxes. The hypothetical was just using larger numbers on multiple dimensions.

You get a similar payback period if you use smaller numbers all around, e.g. a reduction in the overall tax rate from 23% to 21.5% resulting in an increase in the GDP growth rate from 2.5% to 3%.

Moreover, the exact rate is difficult to calculate given limited data (and depends on changing factors in the economy), but the point is the existence of the effect. And it's not obvious that even quite long payback periods wouldn't be worth it, since the lower tax rate and the higher growth rate could then be sustained thereafter indefinitely.

[pyrale]

> "major tax cuts" were actually very small [...] on the order of 1-3% of GDP

3% of the GDP in tax cuts is pretty enormous.

> a hypothetical 15% of GDP reduction in taxes.

For reference, total federal spending was 23% in 2022. Total government spending was 36% in 2023.

So let's say you want to cut 15 of that 36%. That would mean cutting all of health care + all of pensions, or all of health care + all of education. Or defense + pensions + infrastructure. Good luck doing that.

[AnthonyMouse]

> 3% of the GDP in tax cuts is pretty enormous.

It's a <10% reduction in total taxes. It's only enormous if the assumption is that taxes never really go down as a percent of GDP (even in the face of per capita real GDP growth), which has been the case in recent history, but that's kind of the issue.

> So let's say you want to cut 15 of that 36%. That would mean cutting all of health care + all of pensions, or all of health care + all of education. Or defense + pensions + infrastructure.

The obvious thing to do would be to increase the efficiency of each thing rather than cutting any particular thing entirely. Defense spending is full of notorious boondoggles and waste. US healthcare spending goes to a highly captured industry with a large amount of bureaucratic overhead and could be made significantly more efficient, e.g. if US healthcare spending per capita was on par with Canada then healthcare spending could be reduced by more than the identified amount percentage-wise.

Social security, by contrast, isn't exactly "waste" but the program is extremely poorly tailored to its intended purpose of providing a baseline for the elderly, because it pays out higher benefits to people who made more money and can be correspondingly expected to have more savings and need it less. A far more efficient program would be to provide the same amount to every retiree. Enacting that change would be politically difficult, just like making the US healthcare system more efficient would be politically difficult, but the question here is not "how hard would it be to get the votes for this" but rather "if we actually did this, would we be better off"?