NOVEMBER 1, 2012
The New York Times reports that on September 28 the Library of Congress's nonpartisan Congressional Research Service withdrew, under pressure from Senate Minority Leader Mitch McConnell, R.-Ky., and other Senate Republicans, a widely-circulated study concluding that since 1945 tax cuts have had no measurable impact on economic growth. I have cited the study repeatedly since its September 14 release, and so have many other journalists and academics within what Karl Rove once scornfully called the “reality-based community.” The withdrawal won’t have any impact on the report’s availability, except perhaps that more people will read it now. That's because CRS reports are never released to the public anyway. (Its Web site is useless unless you're looking for a job there.) They’re released to members of Congress. Then the interesting ones trickle out onto nongovernmental Web sites or those of individual senators or representatives. McConnell can tell the New York Times all he wants to take down its copy of the report, but he probably won't bother, because it’s public information and it has no conceivable relevance to national security.
The withdrawal is, nonetheless, outrageous. McConnell spokesman Don Stewart told the Times that the CRS report wasn’t just criticized by Republican senators; it was also criticized by what the Times (in a paraphrase) calls “people outside of Congress.” I wish the Times had taken the opportunity to say who these “people outside of Congress” are. You can probably guess. There’s the conservative Heritage Foundation. And there’s the Tax Foundation, a conservative nonprofit (not to be confused with the Tax Policy Center, which is non-ideological and nonpartisan but has nonetheless been vilified by the right for pointing out that Mitt Romney’s proposed tax cut benefited the rich at the expense of the middle class). The author of the CRS study, Thomas Hungerford, has written many excellent studies on themes directly or indirectly related to income distribution, and that’s made him a conservative target for some time. This past April, Kevin Hassett of the conservative American Enterprise Institute (a prominent income-inequality denialist and Romney adviser doomed never to live down his co-authorship, shortly before the dot-com bust, of a book titled Dow 36,000) testified before Congress’s Joint Economic Committee that a different Hungerford report was “radically at odds with the literature. I relish academic debate, and think that authors serve a valuable service when they challenge research. But a CRS report that is supposed to inform about the consensus of the literature that veers so far from that activity is a disservice to Congress, and the taxpayers.” When Hassett cites “the literature” he means “the literature acceptable to AEI hacks and their Republican allies in Congress,” or what Jacob Weisberg has felicitously labelled “the Conintern.”
What’s the matter with the CRS report? Well, it calls the Bush tax cuts “the Bush tax cuts,” which is somehow deemed partisan but in fact is merely explanatory. The Bush tax cuts were tax cuts passed when George W. Bush was president. Bush proposed them, pushed them through Congress, and signed them into law. Even Republicans call the Bush tax cuts “the Bush tax cuts.” The CRS report also stands accused of making reference to “tax cuts for the rich.” This is unacceptably hurtful, I suppose, to a group that a more sensitive person would know to call the “differently-incomed.” As it happens, though, my PDF search of the CRS report reveals that nowhere does the phrase “tax cuts for the rich” appear. The word “rich” does appear here and there, but always in a neutral context, such as, “Under both definitions of the top of the income distribution (i.e., the rich) the income shares were relatively stable until the late 1970s and then started to rise.”
The Times cites two substantive objections Republicans made to the CRS report. One objection (voiced by Heritage's Curtis Dubay within days of the report's release) is that the report doesn’t take into account “other economic and policy factors, many specific to a given period, and determine how those factors influenced economic growth in the period in question.” Precisely what these factors might be Dubay doesn't say (the Times mentions Fed policy), which suggests Dubay is poised to dispute any accounting of taxation's impact on the economy that he finds ideologically uncongenial. The other objection (voiced last week by the Tax Foundation's Stephen Entin) is that CRS looked only at the year following the tax cut, when in fact it can take up to 10 years for the impact of a tax cut to be felt. This argument inadvertently makes tax cuts appear an extremely ineffective policy tool. If you have to wait 10 years to enjoy the benefit, then conservatives are always wrong when they prescribe tax cuts specifically to address current economic circumstances (as they pretty much always do). Both arguments make the perfect the enemy of the good and have the practical effect of making the question of whether tax cuts promote economic growth conveniently unanswerable.
Please note that Hungerford’s study didn’t say there is no relationship between tax cuts and economic growth. It said there is no discernible relationship. He is hardly the first academic researcher to make this observation. The conservative economist Martin Feldstein went fishing for such a relationship in a 1989 paper about economic growth under Ronald Reagan. Feldstein’s paper, coauthored by Douglas Elmendorf, current director of the Congressional Budget Office, reached pretty much the same conclusion (though Feldstein and Elmendorf did suggest that tax cuts could effect the “composition” of economic growth). “We really don’t have any evidence that [personal income tax rates have] any effect on growth,” Berkeley economist Alan Auerbach told Business Week in September. “A lot of the research showing otherwise is based on theoretical calculations.” There isn't even any discernible evidence that capital gains rates affect economic growth. Hungerford made that observation in a 2010 CRS report, but others have said so, too.
If you can’t find any evidence that tax cuts foster economic growth, then any belief that they do must be based purely on faith. The CRS report’s true offense is to question the religion that favors tax cuts to cure any and all problems. For any congressional agency to venture an opinion about such doctrine violates the Constitutional separation between church and state.
Correction. An earlier version of this post made erroneous reference to Sen. Mitch McConnell as the Senate "majority leader."