TAX CUT FOLLIES….I failed in my duty earlier this week to blog about Tuesday’s Treasury report that studied the long-term effects of making Bush’s tax cuts permanent. Why? Because it concluded ? and you’d better sit down for this ? that tax cuts don’t pay for themselves. Imagine! However, since only idiots believe otherwise, I just ignored the whole thing.
But I confess that my brief scan of the news accounts left me with one question. The report suggested that under a certain set of improbable circumstances, the tax cuts would increase economic growth by 0.7%, and I wondered what that meant. 0.7% per year? 0.7 percentage points? Or what?
The CBPP has the answer: it means that in about 20 years the economy would be 0.7% bigger than it otherwise would be. In other words, instead of a GDP of $20 trillion in a couple of decades, our GDP would be about $20.1 trillion. Yippee!
Now, you know that the Treasury guys were doing their level best to make the boss’s tax cuts look good. And yet, this was the best they could come up with. What’s more, they even admit that this is an absolutely best case scenario that assumes massive spending cuts starting in a few years, something that’s plainly not going to happen. Under more reasonable assumptions, the tax cuts would almost certainly have either no effect or a negative effect, so the report doesn’t bother with those.
Once again: at the level of taxation we have in America today, tax cuts have virtually no effect on economic growth. They do allow the super-rich to keep more of their money, though. Eyes on the prize, gang, eyes on the prize.