One thing about Rudy Giuliani’s plan to cut taxes by about four percent of GDP that’s worth keeping in mind, is that in his Foreign Affairs essay he also writes that “The idea of a post-Cold War “peace dividend” was a serious mistake . . . We must rebuild a military force that can deter aggression and meet the wide variety of present and future challenges.” That suggests that he wants to boost defense spending from the four percent or so of GDP we have now to the 6.2 percent of GDP it reached under Ronald Reagan.
Or perhaps even higher. The Reagan years were peacetime; back during Vietnam we got to over 9 percent of GDP. I’m of the view that the evils of budget deficits are often overstated, but Rudy’s talking about blowing a genuinely gigantic hole in the budget up to the levels where it would almost certainly be a serious economic problem. And he wants to do it at a time when we already have relatively low taxes and extremely high defense spending.
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