In Addition to Geithner, Republican Economists Also Argue That Tax Cuts Do Not Pay for Themselves

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Thursday, 05 August 2010 04:37

The NYT discussed the Obama administration's plans to extend President Bush's tax cuts only for households earning less than $250,000 a year. The article also reported on Republican claims that not extending the tax breaks for the wealthy would hurt the economy. It concluded by telling readers that:

"he [Treasury Secretary Timothy Geithner] dismissed as “myths” Republican arguments that tax cuts pay for themselves, by bringing in new revenues from economic growth."

It would have been helpful to note that this is not just Secretary Geithner or the Democrat's view. It is the near unanimous view of every economist who has examined the issue, including Republican economists. For example, Douglas Holtz-Eakin, a prominent Republican economist who was the chief economic advisor to John McCain in his presidential campaign, examined this issue when he headed the Congressional Budget Office. He used a wide variety of models and found that in the most optimistic scenario additional growth could temporarily replace 30 percent of the lost revenue. (Even this increase would largely disappear in the long run.)

The treatment of the issue in the article may lead readers to believe that the question of whether tax cuts pay for themselves is one that is actively debated by economists. In fact, it has long been settled even if some Republican politicians choose to ignore the evidence.