Preface: As I’ve previously noted, I think that there are arguments for doing away with all taxes. However, if we’re going to have taxes, the top 1% should pay their fair share.
Reagan’s domestic policy advisor (Bruce Bartlett) said Wednesday that it was a myth that tax cuts are the key to prosperity, that higher taxes may actually help the economy, and reminded people that Reagan raised the capital gains rate:
(Reagan actually raised taxes 11 times).
Bartlett also recently pointed out:
Taxes were cut in 2001, 2002, 2003, 2004 and 2006.
It would have been one thing if the Bush tax cuts had at least bought the country a higher rate of economic growth, even temporarily. They did not. Real G.D.P. growth peaked at just 3.6 percent in 2004 before fading rapidly. Even before the crisis hit, real G.D.P. was growing less than 2 percent a year…
According to a recent C.B.O. report, they reduced revenue by at least $2.9 trillion below what it otherwise would have been between 2001 and 2011. Slower-than-expected growth reduced revenue by another $3.5 trillion.
Spending was $5.6 trillion higher than the C.B.O. anticipated for a total fiscal turnaround of $12 trillion. That is how a $6 trillion projected surplus turned into a cumulative deficit of $6 trillion.
Ronald Reagan’s budget director David Stockman called the Bush tax cuts the “worst fiscal mistake in history”, and said that extending them will not boost the economy.
And even Reagan’s Assistant Secretary of Treasury with impeccable conservative credentials, who is widely credited with being the “father of supply-side economics” (Paul Craig Roberts) maintains that the Bush tax cuts made no economic sense … even from a supply-side point of view.
As Roberts wrote in 2006:
The George W. Bush regime was faced with no stagflation and no worsening trade-offs between employment and inflation. The Bush administration did not use changes in the marginal rate of taxation to correct a mistaken policy mix or an oversight in economic policy. Moreover, global labor arbitrage is causing American jobs to be outsourced abroad. As Americans are experiencing declining opportunities to work, the response of labor supply to better incentives is small. Similarly, US companies are locating their investments in plant and equipment abroad. The substitution of foreign for American labor and the relocation abroad of US plant and equipment prevent reductions in marginal tax rates from having any appreciable effect on aggregate supply in the US.
I am not a partisan of Dubya’s tax cuts. Income distribution is a legitimate issue. This is especially the case when offshore production and jobs outsourcing are destroying the American middle class.
Just as Dubya hides behind “freedom and democracy” to wage wars of naked aggression, he hides behind supply-side economics in order to reward his cronies.
It’s not just Bush. Roberts laments that the current debt ceiling shenanigans may be:
A perfectly orchestrated scenario for getting rid of the New Deal and the Great Society that use up money that could be spent on wars and bailouts and tax cuts for the rich.
Read this for background on why tax cuts for the richest and tax increases for the rest hurt the economy.