Fulfilling Supply-side Economics

David Leonhardt has an excellent column on Bruce Bartlett's argument that Republicans have taken their opposition to taxes too far:

His conservatism starts with the idea that high taxes are no longer the problem, even if complaining about them still makes for good politics. This year, federal taxes are on pace to equal just 15 percent of gross domestic product. It is the lowest share since 1950.

As the economy recovers, taxes will naturally return to about 18 percent of G.D.P., and Mr. Obama’s proposed rate increase on the affluent would take the level closer to 20 percent. But some basic arithmetic — the Medicare budget, projected to soar in coming decades — suggests taxes need to rise further, and history suggests that’s O.K.

For one thing, past tax increases have not choked off economic growth. The 1980s boom didn’t immediately follow the 1981 Reagan tax cut; it followed his 1982 tax increase to reduce the deficit. The 1990s boom followed the 1993 Clinton tax increase. Tax rates matter, but they’re nowhere near the main force affecting growth.

And taxes are supposed to rise as a country grows richer. This is Wagner’s Law, named for the 19th-century economist Adolf Wagner, who coined it. As societies become more affluent, people demand more services that governments tend to provide, like health care, education and a strong military. A century ago, federal taxes equaled just a few percent of G.D.P. The country wasn’t better off than it is today.