Did The Bush Tax Cuts Reduce Federal Tax Revenue ?
Recent debates over the economic and fiscal impact of the Bush tax cuts indicate that Republicans still haven't learned the lessons of the Bush years.
Are they right ?
Bruce Bartlett, a former Domestic Policy adviser to President Reagan who became a strident critic of the Bush Administration’s economic policies, says that they’re absolutely wrong and that the actual data shows that revenue did go down after the tax cuts went into effect:
Now, it’s not necessarily a bad thing that tax revenues went down. However, considering the fact that, during this same period of time, the Bush Administration and Congress were pursuing policies that were increasing spending, it would seem that this was precisely the wrong thing to do.
The Heritage Foundation’s Brian Riedel completely misses this point in his column today in the Wall Street Journal:
Entitlements and other obligations are driving the deficits. Specifically, Social Security, Medicare, Medicaid and net interest costs are projected to rise by 5.4% of GDP between 2008 and 2020. The Bush tax cuts are a convenient scapegoat for past and future budget woes. But it is the dramatic upward arc of federal spending that is the root of the problem.
In terms of future deficits, this is largely correct. The budget deficits that will unfold during the Obama Administration and the years afterward are largely attributable to the policies President Obama has implemented. However, the deficits that existed during the Bush Administration — which resulted in a doubling of the National Debt from January 2001 to January 2009 — were largely the result of the disconnect that Riedel, McConnell and Kyl are failing to see here.
There’s nothing wrong per se with tax cuts that reduce tax revenue. Quite honestly, less money in the hands of the Federal Government is generally a good thing. However, a policy of tax cuts that result in lower tax revenue combined with massive increases in entitlement and other forms of spending is economic stupidity. Until Republicans recognize that, they’re not really much better than the Democrats on this issue.