As Candidates Warm to Bush Tax Cuts, Economists Warn of Long-Term Effect

Why would tax cuts hurt the economy? Because their one very clear effect was to increase the budget deficit. Combined with spending on the wars in Afghanistan and Iraq, and a huge new prescription drug benefit for Medicare recipients, the cuts helped drive the annual deficit to a peak of nearly $413 billion in 2004. Last year, it dwindled to $162 billion. But the nation's cumulative debt has nearly doubled since Bush took office and now exceeds $9 trillion.

"If tax cuts aren't paid for, the extra debt hurts the economy more than any direct benefit from the tax cuts," said Jason Furman, a former adviser to President Bill Clinton who is now at the Brookings Institution. "If you cut taxes without cutting spending, you're just shifting taxes to the future."

There is little disagreement among most economists on that point. Even the Bush Treasury Department found that failing to cut government spending commensurate with the tax cuts would leave the cuts with a "negligible effect" on the economy, Carroll said.

Because the tax cuts were projected to yield giant budget deficits, they were written to expire in 2010. Bush and other Republicans, including McCain, want to make them permanent, arguing that the specter of higher taxes in 2011 is adding uncertainty to and weakening today's economy. That move that would deprive the treasury of $2.4 trillion over the next 10 years, according to the Joint Committee on Taxation.

Democrats, including Clinton and Obama, have said they want to keep the social-relief provisions, as well as income tax cuts for households making less than $250,000 a year, to help strengthen the middle class. By taking tax cuts away from the rich, the candidates suggest that they will generate cash that could be spent elsewhere.

But that is not technically true. The middle-class tax cuts also reduce revenue -- by about $800 billion over the next decade, according to an analysis by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution.

"They said President Bush was fiscally irresponsible for enacting the tax cuts, but on balance, they would increase the deficit by just as much," said Len Burman, the center's director. "All of the campaigns understand that, but they've collectively decided they can't recognize the reality that we're spending beyond our means."

Of the three candidates, budget analysts said McCain has been most aggressive at identifying ways to reduce spending. "We have to cut spending everywhere," said McCain's top economic adviser, Douglas Holtz-Eakin. But McCain's proposals come nowhere near generating the sums necessary to meet the costs, analysts said.

Out of curiosity, Viard asked a research assistant to put together a list of spending cuts and revenue hikes to cover the cost of making the Bush tax cuts permanent. Her findings? For starters, the government would have to slash benefits for Social Security, Medicare and Medicaid recipients.

"Any such package is political death," Viard said. "Not to put too fine a point on it."