Fox News Inflates Impact Of Bush Tax Cuts
Fox News anchor Jon Scott claimed the Bush tax cuts generated growth and substantially increased revenue. In fact, economists say the Bush tax cuts produced anemic growth at best while creating substantial budget deficits that persist to this day.
Fox's Jon Scott: Bush Tax Cuts "Did Generate Growth" And "Substantially" Increased Revenue
Fox Anchor Jon Scott: "All Those [Bush Tax] Cuts Did Generate Growth." While introducing a segment on the Bush tax cuts, Happening Now anchor Jon Scott claimed that the Bush tax cuts generated economic growth and that "revenue jumped substantially":
SCOTT: President Bush called for another round of tax cuts to jumpstart the economy. In 2003, President Bush signed the Jobs and Growth Tax Relief Act, saving taxpayers an estimated $350 billion. All those cuts did generate growth, and by the end of his second term, revenue jumped substantially from $2 trillion when he took office, reaching $2.5 trillion in 2008. [Fox News, Happening Now, 7/10/12]
Economists: Bush Tax Cuts Did Little To Boost The Economy
Former Reagan Economist Bruce Bartlett: "The 2001 Tax Cut Did Nothing To Stimulate The Economy." In a post on The New York Times' Economix blog, economist Bruce Bartlett -- a former adviser to Presidents Reagan and George H.W. Bush -- wrote that not only did the Bush tax cuts fail to stimulate the economy, but contrary to Scott's claim that revenue "jumped substantially" during the Bush years, it actually fell as a percentage of GDP:
The 2001 tax cut did nothing to stimulate the economy, yet Republicans pushed for additional tax cuts in 2002, 2003, 2004, 2006 and 2008. The economy continued to languish even as the Treasury hemorrhaged revenue, which fell to 17.5 percent of the gross domestic product in 2008 from 20.6 percent in 2000. Republicans abolished Paygo in 2002, and spending rose to 20.7 percent of G.D.P. in 2008 from 18.2 percent in 2001.
According to the C.B.O., by the end of the Bush administration, legislated tax cuts reduced revenues and increased the national debt by $1.6 trillion. Slower-than-expected growth further reduced revenues by $1.4 trillion. [The New York Times, Economix, 6/12/12 ]
Bartlett: Bush Tax Cuts "Did Not" Increase Rate Of Economic Growth. Bartlett wrote in a previous Economix blog post of the lack of an effect on economic growth the Bush tax cuts had:
It would have been one thing if the Bush tax cuts had at least bought the country a higher rate of economic growth, even temporarily. They did not. Real G.D.P. growth peaked at just 3.6 percent in 2004 before fading rapidly. Even before the crisis hit, real G.D.P. was growing less than 2 percent a year.
By contrast, after the 1982 and 1993 tax increases, growth was much more robust. Real G.D.P. rose 7.2 percent in 1984 and continued to rise at more than 3 percent a year for the balance of the 1980s.
Real G.D.P. growth was 4.1 percent in 1994 despite widespread predictions by opponents of the 1993 tax increase that it would bring on another recession. Real growth averaged 4 percent for the balance of the 1990s. By contrast, real G.D.P. growth in the nonrecession years of the 2000s averaged just 2.7 percent a year -- barely above the postwar average. [The New York Times, Economix, 7/26/11 ]
Center For American Progress: Under Bush Tax Policies, Jobs Growth Was "Anemic" And Economic Growth Was "Much Slower." A Center for American Progress study on the effect of the Bush tax cuts on jobs and gross domestic product (GDP) growth found that the tax cuts "didn't deliver what they promised":
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. The next three years were better than the first three as the private sector struggled back to its feet following the first Bush recession. By June of 2007, before the start of the Great Recession, total jobs had grown to 137.7 million. Overall, the six years following the Bush tax cuts saw a 4.8 percent increase in jobs.
That's not nothing, but it's pretty anemic compared to job growth under President Bill Clinton. President Clinton, after raising taxes in 1993, oversaw an economy that went from 111 million jobs in August of that year (the month Clinton's budget plan passed, including the increase in taxes) to 129 million jobs six years later--an increase of 16.2 percent, and more than three times better than under the Bush tax cuts.
And the Bush tax cuts didn't just fail to stack up on jobs. Overall economic growth was much slower under the Bush administration's tax policies than under the Clinton administration's tax policies. Real gross domestic product grew by 26 percent in the six years after Clinton's tax increases. But real GDP grew by just 16 percent in the six years after the Bush tax cuts began. In fact, that six-year growth rate was low even by general historical standards. The average real GDP growth in any given six year period (from any quarter to the same quarter six years later) since World War II was 22 percent.
The report included these charts comparing jobs growth and real GDP growth between the Bush and Clinton administrations:
[Center for American Progress, 7/29/10 ]
CBPP: Bush Economic Expansion "Was Sub-Par Overall." The Center on Budget and Policy Priorities found that the economic expansion between 2001-2007 was especially weak despite the Bush tax cuts:
Members of the [Bush] Administration routinely tout statistics regarding recent economic growth, then credit the President's tax cuts with what they portray as a stellar economic performance. But as a general rule, it is difficult or impossible to infer the effect of a given tax cut from looking at a few years of economic data, simply because so many factors other than tax policy influence the economy. What the data do show clearly is that, despite major tax cuts in 2001, 2002, 2003, 2004, and 2006, the economy's performance between 2001 and 2007 was from stellar.
Growth rates of GDP, investment, and other key economic indicators during the 2001-2007 expansion were below the average for other post-World War II economic expansions ... Growth in wages and salaries and non-residential investment was particularly slow relative to previous expansions, and, while the Administration boasts of its record on jobs, employment growth was weaker in the 2001-2007 period than in any previous post-World War II expansion.
CBPP's report included this chart comparing key economic indicators to past expansions:
[Center on Budget and Policy Priorities, 5/9/08 ]
Economic Policy Institute: After Bush Tax Cuts Were Enacted, Economy Experienced "The Worst Economic Expansion Of The Post-War Era." An EPI policy memo released 10 years after the first Bush tax cuts were enacted found that they were a "poor stimulus" and "did not lead to faster economic growth":
Not only were the Bush-era tax cuts a poor stimulus coming out of the 2001 recession, they did not lead to
faster economic growth during the economic expansion leading up to the Great Recession.
• Between the end of the 2001 recession (2001Q4) and the peak of that expansion (2007Q4), the U.S. economy experienced the worst economic expansion of the post-war era.
• Growth in investment, GDP, and employment all posted their worst performance of any post-war expansion.
• The tax cuts were 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. [Economic Policy Institute, 6/1/11 ]
Economists Say Bush Tax Cuts Lowered Revenue And Contributed Substantially To Debt And Deficits
Bartlett: Bush Tax Cuts Caused Federal Revenue To Shrink. Economist Bruce Bartlett explained in a New York Times blog post that the Bush tax cuts were responsible for lowering federal revenues as a share of the economy:
In a previous post, I noted that federal taxes as a share of gross domestic product were at their lowest level in generations. The Congressional Budget Office expects revenue to be just 14.8 percent of G.D.P. this year; the last year it was lower was 1950, when revenue amounted to 14.4 percent of G.D.P.
But revenue has been below 15 percent of G.D.P. since 2009, and the last time we had three years in a row when revenue as a share of G.D.P. was that low was 1941 to 1943.
Revenue has averaged 18 percent of G.D.P. since 1970 and a little more than that in the postwar era. At a similar stage in previous business cycles, two years past the trough, revenue was considerably higher: 18 percent of G.D.P. in 1977 after the 1973-75 recession; 17.3 percent of G.D.P. in 1984 after the 1981-82 recession, and 17.5 percent of G.D.P. in 1993 after the 1990-91 recession. Revenue was markedly lower, however, at this point after the 2001 recession and was just 16.2 percent of G.D.P. in 2003.
The reason, of course, is that taxes were cut in 2001, 2002, 2003, 2004 and 2006. [The New York Times, Economix, 7/26/11 ]
Revenue As A Share Of The Economy Fell During Bush Administration And Never Recovered. Data from the Federal Reserve Bank of St. Louis show that federal revenue as a percentage of GDP fell after the earliest Bush tax cuts, and never again reached the level they were at when President Bush took office:
[Federal Reserve Bank of St. Louis, accessed 7/11/12 ]
CBPP: "Congressional Budget Office Data Show That The Tax Cuts Have Been The Single Largest Contributor" To Budget Deficits. A 2008 Center on Budget and Policy Priorities report on myths about tax cuts found that tax cuts were the "single largest contributor to the reemergence of substantial budget deficits in recent years":
Congressional Budget Office data show that the tax cuts have been the single largest contributor to the reemergence of substantial budget deficits in recent years. Legislation enacted since 2001 added about $3.0 trillion to deficits between 2001 and 2007, with nearly half of this deterioration in the budget due to the tax cuts (about a third was due to increases in security spending, and about a sixth to increases in domestic spending). Yet the President and some Congressional leaders decline to acknowledge the tax cuts' role in the nation's budget problems, falling back instead on the discredited nostrum that tax cuts "pay for themselves."
The CBPP report included this graph based on CBO data:
[Center on Budget and Policy Priorities, 5/9/08 ]
EPI: Bush Tax Cuts "Added $2.6 Trillion To The Public Debt Over 2001-10." In a September 26, 2011, article, Andrew Fieldhouse of the Economic Policy Institute (EPI) wrote:
A spending-cuts-only approach is regressive in that it forces the brunt of deficit reduction on the backs of poor and working families while ignoring a prime culprit of the budget deficit: the expensive, ineffective, and unfair Bush-era tax cuts. These top-heavy tax cuts added $2.6 trillion to the public debt over 2001-10 and will add $3.8 trillion to deficits over the next decade if fully continued. [Economic Policy Institute, 9/26/11 ]
And The Bush Tax Cuts Continue To Contribute To Deficits
CBPP: "Virtually The Entire Federal Budget Deficit Over The Next Ten Years" Is Due To Bush Policies, Economic Downturn. Center on Budget and Policy Priorities (CBPP) chief economist Chad Stone said in testimony before the Joint Economic Committee in June 2011:
Figure 1 focuses on the projected deficit going forward. It shows that the economic downturn, tax cuts enacted under President Bush, and the wars in Afghanistan and Iraq explain virtually the entire federal budget deficit over the next ten years. The economic downturn added about $300 billion chiefly from the operation of the automatic stabilizers (declining revenue and increased outlays for unemployment insurance and other pro-cyclical spending) and associated interest costs. Both the financial-market measures enacted under President Bush and largely implemented under President Obama such as the Troubled Asset Relief Program (TARP), and the Recovery Act tax cuts and increases in spending enacted under President Obama, were important drivers of the surge in deficits in 2009-11, but those measures will largely have phased out by the end of this year, leaving only associated interest costs in subsequent years.
The CBPP included the following graphic to highlight Stone's testimony:
[Center on Budget and Policy Priorities, 6/21/11 ]
CBO: "Growing Debt" "Reflects An Imbalance Between Revenues And Spending That Predated The Recession." The Congressional Budget Office found that the growing debt-to-GDP ratio stems from both the recession and from the Bush administration's tax polifies. From the CBO's latest Budget and Economic Outlook:
In the past few years, the federal government has been recording the largest budget deficits since 1945, both in dollar terms and as a share of the economy. Consequently, the amount of federal debt held by the public has surged. At the end of 2008, that debt equaled 40 percent of the nation's annual economic output (gross domestic product, or GDP)--a little above the 40-year average of 38 percent. Since then, the figure has shot upward: By the end of this year, the Congressional Budget Office (CBO) projects, federal debt will exceed 70 percent of GDP--the highest percentage since shortly after World War II. The sharp rise in debt stems partly from lower tax revenues and higher federal spending caused by the severe economic downturn and from policies enacted during the past few years. However, the growing debt also reflects an imbalance between spending and revenues that predated the recession. [Congressional Budget Office, June 2012 ]