Unless Congress acts by the end of next month, the Bush tax cuts enacted in 2001 and 2003 are set to expire, with the tax code essentially reverting to where it was under President Bill Clinton. While Democrats and President Obama have said that they want to preserve the tax cuts for the middle-class — saving $830 billion over ten years by allowing the cuts to expire for the richest two percent of Americans — Republicans have steadfastly refused to consider anything but an across-the-board extension.
The expiration of the Bush tax cuts was put into law to mask their long-term cost, and so that they could pass under budget reconciliation rules (and thus not be subjected to a filibuster). Even so, the second round of tax cuts — the Jobs and Growth Tax Relief Reconciliation Act of 2003 — barely scraped by in the Senate.
After a tied 50-50 vote, Vice-President Dick Cheney cast the deciding aye to move the Bush tax cuts forward. And in a segment of Brit Hume’s six-hour documentary, The Right, All Along: The Rise, Fall & Future of Conservatism, which aired on Fox News this weekend, Cheney brags about how his vote was the culmination of a 30 year push to put supply-side economic theory into practice:
I became a believer. If you fast-forward, in 2003, where we cut the capital gains rate, the rate on interest, did the across-the-board cuts in the income tax, and passed by a single vote. My vote.
Since Hume’s documentary is basically a love letter to Arthur Laffer and supply-side economics, the Bush tax cuts are portrayed as a glorious moment in economic history. But looking at the facts distorts that pretty picture. First, 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.
Under President Clinton, job creation, GDP growth, wage growth, and business investment were all stronger than they were under Bush. In fact, the only economic indicators that went up under Bush were deficits and the poverty rate. But Cheney is still crowing, as the country tries to crawl out from the economic catastrophe that occurred on his watch.
Yesterday, David Stockman, budget director under President Reagan, blasted the Republican party for creating a “theology” regarding tax cuts. “After 1985, the Republican Party adopted the idea that tax cuts can solve the whole problem, and that therefore in the future, deficits didn’t matter and tax cuts would be the solution of first, second, and third resort,” Stockman said. Indeed, it was Cheney himself who allegedly claimed that “deficits don’t matter.”
Cross-posted on The Wonk Room.