That Old Black Magic

by Jonathan Chait | July 14, 2010

It may seem as if the Republican Party has shifted the focus of its economic thinking from voodoo economics, with its huge tax cuts and devil-may-care attitude about deficits, to a Hooverite certainty that the solution to economic crisis is to balance the budget. In fact, the only thing that's changed is the context. Deficits are a useful cudgel to oppose the Democratic policy agenda, so Republicans have taken up the banner of opposing deficits (even in their opposition to deficit-reducing measures like the Affordable Care Act.) But the actual Republican agenda of tax cuts uber alles has not changed. When the topic has turned to whether it's necessary to offset the cost of extending the Bush tax cuts, they do do that voodoo that they do so well. Here's California Senate nominee Carley Fiorina:

Let me propose something that may seem crazy to you: you don't need to pay for tax cuts. They pay for themselves, if they are targeted, because they create jobs.

And here's Mitch McConnell:

That there's no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy.

No evidence whatsoever? How about the fact that revenues diminished following the passage of the Bush tax cuts?

If this isn't evidence, I'm not sure what is. And, of course, keep in mind that the natural growth of the economy causes revenue to rise naturally. If tax rates remain the same, revenue will generally rise. It's possible for the revenue-increasing effects of economic growth to overwhelm the revenue-decreasing effects of tax cuts (indeed, this often happens in the short run.) In other words, for tax revenue to be lower in absolute levels nine years after the passage of a tax cut passage is really hard. I don't think even the most determined critic of the bush tax cuts would have predicted such a miserable result.

Now, to be sure, this isn't proof that the Bush tax cuts caused revenue to decrease. Such a thing is unprovable: you can't recreate the exact same economic conditions under two different tax systems. Instead, economists rely upon models to project the effect of tax rates, and all serious economists agree that the Bush tax cuts reduced revenues. Even Bush's own economists will concede as much when pressed.

In any case, the GOP's absolute belief in tax cuts and total lack of interest in deficit reduction remains utterly unabated from the Bush years. The anti-deficit rhetoric of the Obama years has obscured the fact that the party is utterly unreformed.

Source URL: http://www.newrepublic.com//blog/jonathan-chait/76259/old-black-magic