Many economists think
there are major supply-side benefits to more efficient taxation, but most such
economists think those are primarily long-run benefits (faster growth over a
span of time) rather than benefits that would significantly affect revenues in
the short run. The Keynesian argument would make sense if monetary policy were
passive, but in fact, the Fed has its own goals, and its goals don't necessarily
change in response to fiscal policy. And of course the Fed takes fiscal policy
into account when deciding how to accomplish those goals. So if a tax cut or an
expenditure increase were expected to create, say, a million extra jobs, then,
under normal economic conditions, the Fed would simply raise interest
rates enough (according to its best estimate) to destroy a million jobs. (If the
Fed didn't think the demand for those million jobs would be potentially
inflationary, then it would already have tried to create them.)
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