Some Republican Senate candidates have suggested that extending the Bush tax cuts — which are scheduled to expire at the end of the year — will actually be good for the country’s bottom line, as the economic growth that results will more than offset the trillions of dollars in lost revenue. “By extending tax cuts you pay down the deficit, you grow the economy by giving people more money,” said Colorado Republican Ken Buck.
Today, on Fox News Sunday, Pennsylvania’s Republican Senate nominee Pat Toomey joined this club, telling Fox’s Chris Wallace that “it’s not clear” that extending the Bush tax cuts — while also lowering the corporate tax rate — would increase the deficit:
WALLACE: If you extend all the Bush tax cuts, if you were to cut, not eliminate, but cut the corporate tax rate — although that would produce some economic growth and therefore some increased revenues — there no question that would add trillions of dollars to the deficit. The question becomes, what are you going to cut? What are you going to cut in spending, what are you going to cut in entitlements, and I’d ask you to be specific sir.
TOOMEY: Sure. But first of all, it’s not clear that that would add trillions to the deficit, because I really believe that if we expand the base of the economy, which we could do by selectively lowering some taxes, you have a broader base on which to apply the tax.
As American Action Forum president Douglas Holtz-Eakin, who was formerly the Congressional Budget Office director and an adviser to the McCain 2008 presidential campaign, said, “there is no serious research evidence to suggest” that tax cuts pay for themselves. Extending the Bush tax cuts costs more than $3 trillion over ten years, while extending the cuts just for the wealthiest two percent of Americans costs $830 billion over that period.
According to the Center on Budget and Policy Priorities, the Bush-era tax cuts are one of the largest drivers of the country’s long-term structural deficit. And, contrary to Toomey’s assertion, simply lowering taxes doesn’t broaden the tax base (which is accomplished by removing subsidies, loopholes, and giveaways in the tax code).
Toomey was also wrong to suggest that the Bush tax cuts increased revenue: in 2000, the government collected 10 percent of GDP in personal income taxes, a percentage that has never been collected since the Bush tax cuts. Plus, the historical record of the Bush tax cuts suggests that they won’t create the sort of economic growth that Toomey is counting on. In fact, following the Bush tax cuts, the country “registered the weakest jobs and income growth in the post-war period”:
Overall monthly job growth was the worst of any cycle since at least February 1945, and household income growth was negative for the first cycle since tracking began in 1967. Women reversed employment gains of previous cycles. And for African Americans, the worst job growth on record was matched by an unprecedented increase in poverty.
On a final note, Toomey never did identify anything he would cut from the budget to offset the cost of his budget-busting tax cuts.