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Home Publications Blogs Beat the Press The Reagan-Bush Tax Cuts: What Reporters are Supposed to Do #4376

The Reagan-Bush Tax Cuts: What Reporters are Supposed to Do #4376

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Friday, 17 September 2010 15:59

Jay Bookman, at the Atlanta Journal Constitution did a very simple analysis of the benefits of Reagan-Bush style tax cuts. He compared the growth of investment and growth in the low-tax Reagan-Bush years with the higher tax Clinton years. Read the piece to see what it shows.

No, it's not conclusive. There were many factors other than tax rates at work. But, if the tax cuts really did have a big effect in boosting growth, they would counteract most of these other factors.

Comments (7)Add Comment
Clinton cut tax rates
written by wellbasically, September 17, 2010 9:18
I'm surprised at you. Bill Clinton cut capital gains taxes from 28% to 20% (and to 0% on most homes) in 1997 leading to several boom years.

Obama might raise the top income tax rate from 35% to 39% -- whoop de doo. But he also wants to raise investment taxes from 15% to 39%, which will effectively kill off any investment from the top bracket, who are the only people who might have the money to invest.

That's what's killing the economy. The way to raise wages and salaries is to more efficiently connect capital and labor. That is the essence of supply side economics, not "cut taxes".
What is there to invest in?
written by DavidS, September 17, 2010 10:41
@wellbasically

Your argument is religious in nature and defies logic.

There is plenty of capital out there, but investment opportunities are few and far between, especially in the US.

If you find me something that I can think I can profitably invest in right now, then maybe I'll think about taxes.

No sane investor considers the impact of tax rates before they evaluate the investment itself.
@DavidS
written by wellbasically, September 17, 2010 10:58
Spoken like somebody who has never had money enough to pay investment taxes come April 15. Don't feel bad though, I'm with you!
...
written by diesel, September 18, 2010 12:42
According to the article, Republicans, in spite of the lack of any empirical evidence, cling to the belief that supply side economics did or can work.

I am not the first to observe that Republicans have little use for tangible evidence or the laws of scientific thinking. For their ideas on social organization, they harken back 200 or more years to the theories of political economists whose thinking was both a reaction against the church/royalty dominated politics of the middle ages as well as a groping forward to incorporate the glimmers of the dawn of the industrial age. They look backward to the Federalist Papers, the Founding Fathers, etc., as though these were unimpeachable founts of wisdom. To even question them is a sin.

Liberals, in contrast, have availed themselves of the knowledge gleaned from the application of scientific techniques to the humanities--the so-called social sciences. While none dispute that the social sciences are incapable of the same order of precision as the hard sciences, few thinking people would deny that research, experiment, evidence and theory can place our understanding of human affairs on a firmer foundation than simple appeals to authority.

Its not mere coincidence that the business-friendly, anti-intellectual Republican Party is home to religious zealots who believe that the alleged words of prophets spoken two thousand or two hundred years ago trumps contemporary scientific findings. Nor is it accidental that the graduates of social science programs tend to be liberal. And it's not because, as conservatives claim, the faculty is liberal and brainwashes the passive students, it's because thinking people, who weigh the evidence, tend to adopt liberal views.

There is no cure for stupidity. Now, (here's the Nazi gambit) Erich Fromm observed that the business leaders of Weimar Germany struck a deal with Hitler and his Brownshirt thugs. In exchange for clearing the streets of communists and union agitators, they would be handed the reins of government. Their message (the brownshirts), not unlike the Tea Partyers, preached the virtues of the "Folk", simple "common sense" rather than "elitist" knowledge, racial purity, simple religious beliefs, the old values of family and soil etc. Now here's the clincher. The business leaders thought, in this deal with Hitler, that they could control him and simply didn't anticipate that things would get out of hand. Personally, while some agreed with him, most business leaders thought him a nutcase. But, he was useful. He could be used to expand their agenda. And then events took on a momentum of their own that could not be resisted and their plan backfired. People were swept up in an irresistible wave that swamped social constraints. The result was devastation.

The responsible Right in America must beware that when they empower the forces of ignorance, for whatever reason of expediency, they have struck a deal with the devil. And that is a deal, as everyone knows, that one is sooner or later, sure to lose.
...
written by Ron Alley, September 18, 2010 8:31
Well, here we are looking at the voters and trying to divine how they will feel and vote about six weeks from now. I submit there is only one thing we know about the likely vote.

The Circus Rule - You can fool all of the voters some of the time and some of the voters all the time - is in play. The Tea Party represents a segment of the voters who can be fooled all the time. A larger segment of voters are terrified about the economy and their prospects for better lives. They are screaming, hoping someone inside the beltway will listen. They are so scared that fear no longer motivates them. But they are motivated by an opportunity to send a message that cannot be ignored. So, they are willing to be fooled by the deceptively simple but false conservative Republican philosophy of trickle down economics.

Why is that segment of voters so willing to be fooled? The Democrats have failed them. Just look at the Elizabeth Warren non-nomination now playing out. Just look at the health care non-reform that promises to begin in 2014 a date so far off that many voters will not live long enough to find what the supposed reform is all about. Just look at the foreclosure crisis. Geitner recently reported that the HAMP non-initiative had expended only 0.5% of its funds. Just look at the leadership Obama has chosen to lead the federal government's effort to turn around the economy. Obama had two Nobel prize winners - Stiglitz and Krugman who were highly motivated to serve and who would have championed effective stimulus policy. They are keeping the the bench warm.

What message will the voters send? As my son would say, "Go Figure".
...
written by skeptonomist, September 18, 2010 9:28
The effect of tax cutting on private investment is shown graphically here:

http://www.skeptometrics.org/PrivateInvestment/PrivateInvestment.htm

The effects on government revenue and GDP growth are also well known. It may not be too surprising that he-said-she-said reporters and hired-gun pundits ignore the data, but even many economists constantly promote "theories" that are in complete disagreement with the data and with history.
Bill Clinton was a supply sider
written by wellbasically, September 18, 2010 11:23
How can I make this more clear: the article had a huge omission. Bill Clinton's years report favorably because Bill Clinton signed a huge supply-side tax cut.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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