Ten Years Of The Bush Tax Cuts
by Pat Garofalo
Ten years ago tomorrow, the first of the Bush tax cuts was enacted. That 2001 tax cut was followed up by a second tax cut in 2003, passed after Vice-President Dick Cheney reportedly asserted that “deficits don’t matter.”
The tax cuts were sold as necessary economic stimulus that would boost job creation and a moribund economy. “Tax relief will create new jobs, tax relief will generate new wealth, and tax relief will open new opportunities,” Bush said on April 16, 2001 as he was pushing for the passage of the first tax cut. Two years later he said, “These tax reductions will bring real and immediate benefits to middle-income Americans…By speeding up the income tax cuts, we will speed up economic recovery and the pace of job creation.” Bush called the 2001 tax cut, “a victory for fairness and a vote for economic growth.” Then-Speaker of the House Dennis Hastert (R-IL) said that the cuts were necessary to “spur the economy on.” And up through 2008, Bush was still convinced that his tax cuts had been good for the economy. “I think when people take a look back at this moment in our economic history, they’ll recognize tax cuts work. They have made a difference,” Bush said. However, the record of the Bush tax cuts is undeniable: their enactment coincided with the weakest economic expansion of the post-war period, blowing up the national deficit and debt, while not bringing any of the promised gains.
DIDN’T CREATE JOBS: The lofty rhetoric used by conservatives to sell the Bush tax cuts didn’t match reality. During the decade after the Bush tax cuts were passed, “growth in investment, GDP, and employment all posted their worst performance of any post-war expansion.” Following the Bush tax cuts, “Overall monthly job growth was the worst of any cycle since at least February 1945, and household income growth was negative for the first cycle since tracking began in 1967.” As the Center for American Progress’ Michael Linden and Michael Ettlinger noted, “The economy boasted 132 million jobs in June of 2001, the month that the first of the Bush tax cuts was signed into law. Three years later, in June of 2004, there were just 131.4 million jobs. The economy did not add a single new job during three years under the Bush tax cuts.” Overall, Bush’s job growth was just 4.8 percent, compared to the 16.2 percent job growth under President Bill Clinton. As the Economic Policy Institute pointed out, the tax cuts were also “supposed to encourage business investment, but nonresidential fixed investment increased a meager 2.1% annually — a third of the average increase and less than half that of the next poorest post-war increase in business investment on record.” The only people for whom the Bush tax cuts did much good was the wealthy. According to EPI, “the top 1% of earners received 38% of the breaks in the 2001-08 tax changes; 55% of the tax breaks went to the top 10% of earners.” The richest one percent of Americans captured 65 percent of the income gains between 2002 and 2007, while “at the end of the 2000s economic expansion, the typical household had income below what it had been in 2000.”
BLEW UP THE DEFICIT: During a 2001 address to Congress, Bush said, “At the end of those 10 years [in the 2001 budget], we will have paid down all the debt that is available to retire. That is more debt repaid more quickly than has ever been repaid by any nation at any time in history.” However, thanks in large part to the Bush tax cuts, the debt ballooned under Bush, with debt held by the public increasing from $3.5 trillion to nearly $6 trillion and gross federal debt going from $5.6 trillion to nearly $10 trillion.In fact, “From 2001 through 2010, the cuts added $2.6 trillion to the public debt, nearly 50% of the total debt accrued during this period.” As the Center on Budget and Policy Priorities found, “the tax cuts account for $1.7 trillion in extra deficits in 2001 through 2008, and $3.7 trillion over the 2009-2019 period.” In addition, the extra debt-service costs caused by the Bush-era tax cuts,amounts “to more than $200 billion through 2008 and another $1.7 trillion over the 2009-2019 period — nearly $330 billion in 2019 alone.”
TODAY’S GOP DOUBLES-DOWN: Today’s Republicans have not learned from the disastrous tax policies of their predecessors. For starters, Republicans only agreed to last December’s tax deal because it extended the Bush tax cuts for the richest two percent of Americans. Now, both the House Republican budget and the House Republican “jobs plan” released last week include further reductions in the top tax rate from 35 percent to 25 percent. In fact, the “jobs plan” document calls for tax cuts to “Increase American competitiveness to spur investment and create more American jobs.” “Just because we proposed it in the past doesn’t mean it was not a good idea,” said Speaker of the House John Boehner (R-OH) of the House Republican plan. “I think the package that we have represents a lot of traditional ideas and new ideas about how to let the private sector create jobs.” As the Washington Post’s Ezra Klein noted, “You could read [the GOP jobs plan] without knowing the past decade ever happened.” As CAP Senior Economist Heather Boushey said, “The problem then and now with the top Republican goal of economic policy — to make the top income earners in our society even more incredibly wealthy — is that it undercuts our nation’s prospects for a prosperous future.” The Washington Monthly’s Steve Benen noted that, “Republicans are confident this will work wonders, just as they were equally confident about the identical agenda in the last decade.” But if the last decade is any example, this is not a policy prescription that should be taken seriously.