PRESIDENT’S CLAIM THAT TAX CUTS
PAY FOR THEMSELVES REFUTED BY
ADMINISTRATION’S OWN ANALYSIS

From the Center for Budget and Policy Priorities courtesy of AlterNet:

These remarks mirror previous statements by the President, the Vice-President, and key Congressional leaders that the increase in revenues in 2005 and the increase now projected for 2006 prove that tax cuts “pay for themselves” — that the economy expands so much as a result of tax cuts that it produces the same level of revenue as it would have without the tax cuts.[2]

Economists and budget analysts outside of the administration have explained that these claims are not supported by data or economic theory.[3] Now a Department of Treasury analysis presented in the Mid-Session Review itself confirms what outside experts have consistently said — tax cuts do not come remotely close to paying for themselves.[4]

The Treasury analysis concludes that making the President’s tax cuts permanent — and paying for the tax cuts with future reductions in spending — may ultimately increase the level of economic output (national income) in the long run by as much as 0.7 percent. (An increase in the level of economic output of 0.7 percent — the Treasury’s best-case scenario — in 20 years would represent an increase of about 4/100ths of one percentage point in the annual growth rate of the economy.)

Click here for the rest.

Back in the spring of 1986, I was competing in the domestic extemporaneous speaking contest at the National Forensic League East Texas district tournament. I and several other students managed to make it into the final round. The rules for the event are such that contestants never know what they're going to be speaking on until half an hour before they speak, which is what makes it "extemporaneous." We would write, rehearse, and memorize seven minutes of political wonkery in thirty minutes. Not that hard once you get used to it, especially if you keep up with the news. But then, that's easy for me to say. I was good. And that day, at that tournament, I drew the topic with which I felt more familiar than pretty much anybody else my age: what is the Reagan administration doing to reduce the budget deficit?

I had in the year before that tournament made a special effort to get to the bottom of what was then called "Reaganomics," but is now more simply referred to as neoliberalism. I could spout off economic double talk as well as any idiot pundit on cable TV today. And it blew the judges away--they said that I went too fast, but it was obvious that I knew what I was talking about, and had much more command of my material than my competition. They gave me first place, which qualified me for the national tournament, where I eventually ranked fifteenth in the nation.

Yeah, those were my glory days as a young Republican mouthpiece. So thank you Ronald Reagan for your crazy, goofy, nutty ideas about the economy; they got me some massive props and made me feel damned superior. Alas, that's about all those ideas were ever good for.

The notion about tax cuts paradoxically increasing tax revenue is simple and clever, which is why it's so appealing, I think, to so many people: cutting taxes supposedly stimulates the economy, which creates more taxable wealth, which pays off into more tax dollars despite the lowered tax rate. Like I said, clever. If only it actually worked that way. Actually, I think there can be some truth to this wacky notion as long as the cuts are tailored in very specific ways that would assure that saved dollars would really be used to expand businesses and create jobs. Unfortunately, Republicans generally use an axe when they should be using precise surgical instruments. I mean, you can transplant a heart with an axe if you really want to; it's just that it would kill the patient, and that's exactly how the GOP approaches tax cuts and economic stimulus.

It's not been well reported these last few years, but the Gipper ended up seeing the error of his ways and had to go back and increase taxes massively in order to clean up the mess he'd made with his irresponsible tax cuts a couple of years before--indeed, it was the biggest tax increase in US history, but that information simply doesn't fit the Republican narrative about the Great Tax Cutter, so we're not hearing about it today.

Anyway, in summary, common sense trumps conventional wisdom here. Tax cuts generally do not mean more tax revenue; tax cuts mean less tax revenue. And if the Republicans keep this shit up for too terribly long, we're looking at total economic collapse by way of the deficit causing general stagnation and then decline in the long run, worse, conceivably, than the Great Depression.

I have a sneaking suspicion that many conservative politicians are aware of this, but don't care. As long as their wealthy supporters continue to get richer, they're cool with it all. That's pretty fucking evil if you ask me.

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