Ten years later, there’s no more surplus. All we’ve got are deficits. And of all the policies we’ve passed in the last 10 years, Bush’s two rounds of tax cuts bear more responsibility for those deficits than any other legislative initiative. So what have we learned?
Nothing, I fear. This morning, Tim Pawlenty released an economic plan that was, if anything, more irresponsible than Bush’s tax cuts. At least Bush admitted that cutting taxes costs money. That’s why it made sense — or at least seemed to make sense — to use tax cuts to rebate a surplus. If cutting taxes raised government revenues, that statement would make no sense, as more tax cuts would simply lead to larger surpluses.
But that’s exactly what Pawlenty argued today. His tax cuts, he wrote, will boost annual economic growth from two percent to five percent and, in doing, “generate $3.8 trillion dollars in new tax revenues” and “reduce projected deficits by 40 percent.” In other words, you can have your cake, eat it too, and fit into those pants you haven’t worn since high schools. All you need are tax cuts.
Pawlenty also promised that “the real slog of the next administration will be an unrelenting trench battle against overregulation.” Bush wasn’t a big fan of regulations either. So we got a test of the low tax/low regulation approach in the Aughts. And how did it work out? “That business cycle was the first one in the postwar period where the income for a typical working-class family was lower at the end than at the beginning,” says Larry Mishel, president of the Economic Policy Institute. You can see a comparison of the Clinton economy, which took place amid tax increases, and the Bush economy, which followed massive tax cuts, in this graph:
And that’s the more important lesson. Suggesting that tax cuts increase federal revenues is foolish. Suggesting that tax cuts and lower regulations could boost growth isn’t. But anyone making that argument needs to deal with the failure of the Bush tax cuts to give us more growth, lower deficits or higher median incomes. Pawlenty — and the Republican Party more generally — haven’t done that hard work. Instead, they’re making wilder, more outlandish claims for tax cuts than Bush ever dared. So perhaps I was too kind when I said we haven’t learned anything from the failure of the Bush tax cuts. In the case of the GOP, we seem to have actually unlearned some things, too.