Kentucky voices: GOP in denial: Tax cuts do not increase revenues

September 29, 2011 

President Barack Obama wants to increase taxes on the wealthy and close tax loopholes on oil and gas companies in order to pay for his jobs bill and much of his deficit reduction plan.

The GOP response has been a loud NO to any tax increases. So there is no end in sight for the gridlock we saw in the debt-ceiling battle.

Republicans even claim that further tax cuts for the rich will both reduce soaring government deficits and create jobs. They base their incoherent position on a dogma to which they cling despite overwhelming evidence against it.

It appears to be true by definition that if government cuts taxes, it will have less revenue, less money to spend. So isn't it bizarre to lower taxes on the rich when the government can't afford to pay its bills?

No, say Republicans, because (as George W. Bush said in 2006) "You cut taxes and the tax revenues increase."

Lower taxes are supposed to create more business start-ups and expansion of existing firms. And, as Mitt Romney put it last December: "the taxes paid by these new or growing businesses and employees can more than make up for the lower rates of taxation."

This claim is dismissed as nonsense by economists of both parties. But, as Sen. Mitch McConnell assured a reporter in July of 2010: it is "the view of virtually every Republican on that subject."

McConnell's remark was in support of GOP Senate Minority Whip Jon Kyl, R-Ariz., who had insisted that emergency aid for the unemployed must be offset by tax hikes or spending cuts. Kyl explained that, while "you do need to offset the cost of increased spending ... you should never have to offset cost of a deliberate decision to reduce tax rates on Americans."

Tax cuts just pay for themselves; they don't add to the deficit.

It's very important to Republicans that tax cuts should not be seen as spending, as costing anything. Otherwise, their goal of cutting taxes would contradict their stated goal of reducing deficits.

Greg Mankiw, Harvard economist and chairman of the Council of Economic Advisers (2003-05) under George W. Bush, said in 2007 that "I did not find such a claim credible, based on the available evidence. I never have, and I still don't."

Two other chairmen of Bush's CEA, Andrew Samwick and Ed Lazear, as well as Bush's former Treasury Secretary Hank Paulsen, have said the same thing in public. In his 1998 textbook Principles of Economics, Maskiw described those who hold this view as "charlatans and cranks."

Back in 1980, presidential candidate George H.W. Bush called it "voodoo economics." Thirty-one years later, Republicans are still peddling this false doctrine. They love it because it makes tax cuts an easy sell to voters who want to keep their favorite social programs but resent being taxed.

OK, some Republican might say, you got us on that one. But everyone knows that tax cuts do grow businesses and create employment, while raising taxes has the opposite effect. So it still makes sense to cut taxes when joblessness is at a crisis level.

The two terms of George W. Bush were a massive experiment in cutting taxes to make the economy prosper. The results were dismal.

In 2008, tax expert David Cay Johnston reported that "Total income was $2.74 trillion less (in 2008 dollars) during the eight Bush years than if incomes had stayed at 2000 levels." The average family lost $21,000 during this period.

The government didn't do any better. According to the Washington Post, by 2011 the Bush tax cuts had cost, in lost revenue, $2.8 trillion.

Did this staggering cost at least buy us a proportional increase in jobs? No.

In September, 2009, the majority staff of the Joint Congressional Economic Committee reported that the Bush economy had the slowest job growth of any administration since Herbert Hoover.

Physicist Albert Einstein defined insanity as "doing the same thing over and over again and expecting different results." Is the GOP's fiscal policy insane? Or is it a mask for its ultimate goal of leaving the government unable to afford social programs that most Americans want?

Brian Cooney is emeritus professor of philosophy at Centre College

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