Wednesday round up.

At redblueamerica.com, janmb misrepresents Jude Wanniski’s Two Santa Claus Theory. While Wanniski did argue Republicans should cut taxes in that article, he did not advocate they spend “like drunken sailors and put it all on the national credit card.”

Larry Kudlow argues (with Dan Mitchell's help) that government salaries are part of the reason for the debt crisis.

At Wainwright Economics, John Tamny says the wealth gap is irrelevant.

At themoneyillusion.com, Scott Sumner comments on Steve Hanke's recent item on Estonia and Greece.

The Washington Post expresses surprise that markets still are willing to buy 10-year U.S. Treasury bonds at a 3.3 percent interest rate.

Contrary to conventional wisdom, most supply-siders believe deficits have less to do with interest rates than does the dollar’s value. Larry Kudlow made that point earlier this year.

Therefore, this Bruce Bartlett quote is something of a surprise:

"You can talk about the deficit until you're blue in the face, but we'll only get political traction on meaningful deficit reduction when there is economic pain being caused by the deficit in the form of inflation or high interest rates or both," said Bruce Bartlett, a Treasury Department official in the George H.W. Bush administration who recently wrote an article predicting that the U.S. government will be downgraded in less than a decade.

As Bartlett surely knows, deficits lead to inflation only to the extent monetary authorities choose to devalue the dollar to reduce the debt burden. That's a dishonest course, the stealth equivalent of a default, and it's the opposite of what Alexander Hamilton did after the War of Independence, when he committed the U.S. to repay its large debts in gold-backed dollars. The U.S. similarly committed to repay its enormous World War II debts in gold-backed dollars, which it financed at two percent.

The question is, with gold having risen for nine years and now at $1200, why aren't interest rates higher? Is it the flood of savings from the world's soon-to-be-retired, desperate for safe investments? A central bank Ponzi scheme? The zero Fed Funds Rate? All of the above?

Comments welcome.

Wednesday articles.

Larry Kudlow sees a new tea-party Senate nucleus forming.

Former Dallas Federal Reserve President Bob McTeer says there can be no inflation because money supply is flat.

More than a decade ago, supply-sider Jude Wanniski pointed out that focusing solely on money supply was a mistake.

Art Laffer argues the low-tax environment of Texas helped it weather the recession.

As noted below, Dave Ranson recently wrote at The Wall Street Journal on the futility of raising taxes. Here’s a similar recent analysis from Nathan Lewis.

David Goldman analyzes the foreign financing of U.S. fiscal deficits.

Monday update.

Dan Mitchell comments on Alan Reynolds’ recent response to Kevin Williamson’s Goodbye Supply Side.

David Ranson says tax rate hikes don’t work at extracting more of the national income.

Rep. Ted Poe (TX) calls for Congress to regulate the dollar’s value.

John Tamny argues that bank bailouts discourage banks from lending.

A year ago, Robert Mundell made comments on the euro that seem awfully prescient.

And here’s a recent interview with Mundell describing the situation (imperfectly translated from Russian).

Wainwright Economics has a paper by John Tamny that explores the myth of the artificially cheap yuan.