WP fact-checks Bush on tax cut effect

The Washington Post published a generally excellent article fact-checking President Bush's claims that recently announced improvements in the projected federal deficit are the result of his tax cuts:

With great fanfare, President Bush last week claimed credit for a striking reversal of fortune: New figures show the federal budget deficit shrinking by 40 percent over the past two years, a turnaround the president hopes will strengthen his push for further tax cuts.

Bush hailed the dwindling deficit as a direct result of "pro-growth economic policies," particularly huge tax cuts enacted during his first term. "Tax relief fuels economic growth. And growth -- when the economy grows, more tax revenues come to Washington. And that's what's happened," Bush said.

Economists said Bush was claiming credit where little is due. The economy has grown and tax receipts have risen at historic rates over the past two years, but the Bush tax cuts played a small role in that process, they said, and cost the Treasury more in lost taxes than it gained from the resulting economic stimulus.

"Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that," said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute. "It's logically possible" that a tax cut could spur sufficient economic growth to pay for itself, Viard said. "But there's no evidence that these tax cuts would come anywhere close to that."

Economists at the nonpartisan Congressional Budget Office and in the Treasury Department have reached the same conclusion. An analysis of Treasury data prepared last month by the Congressional Research Service estimates that economic growth fueled by the cuts is likely to generate revenue worth about 7 percent of the total cost of the cuts, a broad package of rate reductions and tax credits that has returned an estimated $1.1 trillion to taxpayers since 2001.

The Post also compiles yet another quote from a Bush official admitting that tax cuts don't increase revenue:

Robert Carroll, deputy assistant Treasury secretary for tax analysis, said neither the president nor anyone else in the administration is claiming that tax cuts alone produced the unexpected surge in revenue. "As a matter of principle, we do not think tax cuts pay for themselves," Carroll said.

But, he said, "we do think good tax policy can lead to important economic benefits... The size of the tax base is larger than it would have been without the tax relief."

However, the Post fails to point out that the administration has repeatedly suggested that tax cuts do pay for themselves, as I showed. The timeline is below the fold.

President Bush, 11/13/02: "Well, we have a deficit because tax revenues are down. Make no mistake about it, the tax relief package that we passed -- that should be permanent, by the way -- has helped the economy, and that the deficit would have been bigger without the tax relief package."

President Bush, 1/7/03: "This growth and jobs package is essential in the short run; it's an immediate boost to the economy. And these proposals will help stimulate investment and put more people back to work, is what we want to have happen. They are essential for the long run, as well -- to lay the groundwork for future growth and future prosperity. That growth will bring the added benefit of higher revenues for the government -- revenues that will keep tax rates low, while fulfilling key obligations and protecting programs such as Medicare and Social Security."

Press Secretary Ari Fleischer, 1/8/03: "The entire [tax cut] package the President does believe will lead to growth, which will over time grow the economy, create additional revenues for the federal government and pay for itself."

Vice President Cheney, 1/30/03: "The President's proposals will reduce the tax burden on the American people by $670 billion over the next 10 years. By leaving more money in the hands of the people who earn it, people who will spend and invest and save and add momentum to our recovery, we'll help create more jobs and ultimately increase tax revenues for the government."

President Bush, 5/7/03: "[T]he other way to deal with the deficit is to put policies in place that increase the revenues coming into the Treasury. And the best way to encourage revenues coming into the Treasury is to promote policy which encourages economic growth and vitality. A growing economy is going to produce more revenues for the federal Treasury. The way to deal with the deficit is not to be timid on the growth package; the way to deal with the deficit is to have a robust enough growth package so we get more revenues coming into the federal Treasury."

President Bush, 8/6/05: "The tax relief stimulated economic vitality and growth and it has helped increase revenues to the Treasury. The increased revenues and our spending restraint have led to good progress in reducing the federal deficit. Last month we learned that the deficit is now projected to be $94 billion less than previously expected. I set a goal of cutting the deficit in half by 2009, and we are ahead of pace to meet that goal."

President Bush, 2/8/06: "One of the interesting things that I hope you realize when it comes to cutting taxes is this tax relief not only has helped our economy, but it's helped the federal budget. In 2004, tax revenues to the Treasury grew about 5.5 percent. That's kind of counter-intuitive, isn't it? At least it is for some in Washington. You cut taxes and the tax revenues increase. See, some people are going to say, well, you cut taxes, you're going to have less revenue. No, that's not what happened. What happened was we cut taxes and in 2004, revenues increased 5.5 percent. And last year those revenues increased 14.5 percent, or $274 billion. And the reason why is cutting taxes caused the economy to grow, and as the economy grows there is more revenue generated in the private sector, which yields more tax revenues."

Vice President Cheney, 2/9/06: The President's tax policies have strengthened the economy, as we knew they would. And despite forecasts to the contrary, the tax cuts have translated into higher federal revenues... Nobody's perfect, but when revenue projections are off by 180 degrees, it's time to reexamine our assumptions and to consider using more dynamic analysis to measure the true impact of tax cuts on the American economy. Recognizing this, the President's recently submitted budget would create a new Dynamic Analysis Division within the Treasury Department to analyze major tax proposals. The evidence is in, it's time for everyone to admit that sensible tax cuts increase economic growth, and add to the federal treasury.

President Bush, 7/11/06: "Some in Washington say we had to choose between cutting taxes and cutting the deficit. You might remember those debates. You endured that rhetoric hour after hour on the floor of the Senate and the House. Today's numbers show that that was a false choice. The economic growth fueled by tax relief has helped send our tax revenues soaring. That's what's happened."

Comments

[Seth]

And let us not forget that the government spending increase of 15-20% probably helped to stimulate that growth.

[Reid]

Post hoc ergo propter hoc. Hey, if Clinton's modest tax increase in the early 90's set the stage for the roaring economy of the late 90's, then Bush's modest tax cuts did the same for the 00's. You can have both or neither. Make your choice.