December 25, 2024
Editorial

BOOM AND ITS ECHO

For years, liberals have been saying the tax cuts under President Bush wouldn’t have much of an effect on the economy but would drive up the deficit. Congress largely ignored them while the White House trumpeted the growing economy as proof that the cuts worked. But with more tax cuts proposed in the president’s new budget, liberals have found an ally in Bruce Bartlett, or more to the point, in a series of measures he explains.

Mr. Bartlett was executive director of the Joint Economic Committee of Congress, a member of the Reagan White House and served in the Treasury Department during the administration of President George H.W. Bush. He is the author not only of “Reaganomics,” but more recently of “Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy.” Lots of conservatives aren’t all that happy with him these days.

Other conservatives, of course, aren’t happy with President Bush for increasing spending while cutting revenues since 2001, thereby raising the debt by more than $1 trillion. Liberals were right about the effect of the tax cuts’ effect on the deficit, but what about the growing economy? In a column in the New York Times recently, Mr. Bartlett compared growth since the end of the last recession, November 2001, and measured it against the end of the previous recession, in 1991, over the same length of time.

According to the National Bureau of Economic Research, since the 2001 recession, real gross domestic product is up 13.5 percent; real gross private domestic investment, up 32.3 percent; payroll employment, up 2.8 percent; Standard & Poor’s Index, up 13.9 percent.

Looks good, all the indicators are up, as you might expect. But now look at them after the early ’90s recession: real gross domestic product, up 13.25 percent; real gross private domestic investment, up 43 percent; payroll employment, up 7.7 percent; Standard & Poor’s Index, up 45 percent. GDP is about the same, but in the three other measures, growth was much stronger in the early ’90s. The most important point about this difference, however, has to do with taxes.

Fifteen years ago, first President George H.W. Bush and then President Bill Clinton raised taxes. They did it not only substantially but mostly on the rich, including an increase on the top income tax rate. The economy grew strongly. As a result of the tax increases? Not hardly, but just as tax increases won’t produce a stronger economy,

tax cuts won’t either.

They will, however, leave a huge debt for someone else to pay.


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