In the grand conservative tradition of cherry-picking convenient quotations, Greg Mankiw pulls one from Christina and David Romer’s paper, “The Macroeconomic Effects of Tax Changes” (PDF).
Tax changes have very large effects on output. Our baseline specification suggests that an exogenous tax increase of one percent of GDP lowers real GDP by roughly three percent.
While ignoring an equally or actually far more important statement, given current conditions. (Also cherry-picked. But fair’s fair.)
…tax increases to reduce an inherited budget deficit do not have the large output costs associated with other exogenous tax increases. This is consistent with the idea that deficit-driven tax increases may have important expansionary effects…