On Sunday, Sen. Jon Kyl (R-AZ) appeared on Fox News and admitted that Republicans have no interest in trying to pay for their desired extension of the Bush tax cuts for the wealthy, which will cost about $678 billion. “You should never have to offset cost of a deliberate decision to reduce tax rates on Americans,” Kyl said.
It’s become a standard conservative position that all the Bush tax cuts should be extended, and the GOP is coalescing around Kyl’s pronouncement that the extension shouldn’t be paid for. “When you’re spending money, you’re spending money that is — it’s not the same thing because it’s growing the government. So I tend to think that tax cuts should not have to be offset,” said Sen. Judd Gregg (R-NH).
Not only have conservatives decided that their concern with the deficit doesn’t apply to tax cuts for the rich, but they are weaving an economic fantasy in order to justify their position. Yesterday, Senate Minority Leader Mitch McConnell (R-KY) said that “there’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy.”
I emailed McConnell’s assertion to CAP Associate Director for Tax and Budget Policy Michael Linden, who responded by saying “this graph took me literally five minutes to make.” The graph tracks tax receipts as a percentage of GDP, complete with the precipitous drop following the Bush tax cuts:
Even in total dollars, tax receipts were lower in 2002 and 2003 than they were in 2001. And the slight uptick that occurs around 2005, which still doesn’t come close to paying for the cost of the cuts, is simply the housing bubble inflating. So if conservatives want to take credit for that rise, then they have to own the bubble too. As Paul Krugman wrote, “everything you’ve heard about how revenues have boomed since the Bush tax cuts is wrong. What really happened was that revenue plunged, as a percent of GDP, in the early Bush years, then staged a partial, but only partial, recovery.”
Factcheck.org has called the assertion that the Bush tax cuts increased revenue “highly misleading,” while the Center on Budget and Policy Priorities has said the claim that tax cuts inevitably pay for themselves “is contradicted by the historical record.” In all, the Bush tax cuts will cause $3.4 trillion in deficits over between 2009 and 2019. Just debt-service costs amount to “$1.7 trillion over the 2009-2019 period” and more than $330 billion in the 2019 fiscal year.