The Bush tax cuts failed to juice the economy in the way Republicans promised they would, with growth in the 2000s stagnating relative to the Clinton years. But that hasn’t stopped today’s Republicans from arguing the tax cuts they’re pushing with President Trump’s help will produce a different outcome.
During a news conference on Thursday, a reporter asked House Speaker Paul Ryan (R-WI) and House Ways and Means Committee Chairman Kevin Brady (R-TX) to explain why Americans should believe the trickle-down fairy will work its magic this time around and turn a drastic cut in corporate taxes that largely benefits the top one percent into wage increases and jobs that benefit them. Neither could provide a satisfying answer.
“The Bush tax cuts did not result in growth or higher wages or more jobs,” the reporter asked. “Why are you certain that this will be different?”
Ryan deferred to Brady, who didn’t directly respond. Instead, he praised Ryan, and then touted how Americans will be able to file their taxes on smaller pieces of paper.
“So this is a complete redesign of the code, so we can simplify it so much that nine out of 10 Americans can file by using a postcard-style system,” Brady said. “Lowering the rates, protecting more of the first dollars you earned, making sure you have strong middle-class relief — but it’s more than that. We’re not just putting higher-octane fuel in the old clunker of a tax car — we propose to drive a newer tax car that can compete and win against any country in the world.”
Brady concluded by basically asking Americans to trust him.
“So that redesign for simplicity, fairness, and competitiveness — I predict under this tax reform plan America will vault from 31st in the world among our competitors to the top three as the best places on the planet for that next new job, that next new manufacturing plant, that next new research headquarters — that’s what’s different,” he said.
But economist disagree. Consider some of the points raised by former Reagan policy adviser Bruce Bartlett in an op-ed he recently penned for the Washington Post entitled, “I helped create the GOP tax myth. Trump is wrong: Tax cuts don’t equal growth.”
Bartlett points out that while cutting taxes made sense in the late 1970s — a time when “the top tax rate was 70 percent and the economy seemed trapped in stagflation with no way out” — the strongest decade for economic growth in recent U.S. history was the 1990s, a decade in which President Clinton raised income taxes on the wealthy.
The same year that Clinton left office, President Bush shepherded tax cuts through Congress that mainly benefited high earners, as would be the case under Trump’s plan. But as the Center for Budget and Policy Priorities wrote in a recent look at the legacy of the Bush tax cuts, although Republicans said they would dramatically spur growth, “evidence suggests that they did not improve economic growth or pay for themselves, but instead ballooned deficits and debt and contributed to a rise in income inequality.”
Today’s Republicans are recycling talking points from the Bush era. Consider this passage from a September New York Times report headlined, “In Battle Over Tax Cuts, It’s Republicans vs. Economists.”
“Party leaders are rejecting criticism that their yet-to-be-unveiled tax plan will add to the ballooning federal deficit, saying the tax cuts will essentially pay for themselves by generating robust economic growth,” the Times wrote.
But as Thursday’s news conference indicated, the theory underpinning that belief is mostly a matter of faith, rather than economics.