One trick pony
So How Did the Bush Tax Cuts Work Out for the Economy?
David Cay Johnston | Sep. 24, 2010 08:02 PM EDT
The 2008 income tax data are now in, so we can assess the fulfillment of the Republican promise that tax cuts would produce widespread prosperity by looking at all the years of the George W. Bush presidency.
Just as they did in 2000, the Republicans are running this year on an economic platform of tax cuts, especially making the tax cuts permanent for the richest among us. So how did the tax cuts work out? My analysis of the new data, with all figures in 2008 dollars:
Total income was $2.74 trillion less during the eight Bush years than if incomes had stayed at 2000 levels.
That much additional income would have more than made up for the lack of demand that keeps us mired in the Great Recession. That would mean no need for a stimulus, although it would not have affected the last administration's interfering with market capitalism by bailing out irresponsible Wall Streeters instead of letting the market determine their fortunes.
In only two years was total income up, but even when those years are combined they exceed the declines in only one of the other six years.
Even if we limit the analysis by starting in 2003, when the dividend and capital gains tax cuts began, through the peak year of 2007, the result is still less income than at the 2000 level. Total income was down $951 billion during those four years.
Average incomes fell. Average taxpayer income was down $3,512, or 5.7 percent, in 2008 compared with 2000, President Bush's own benchmark year for his promises of prosperity through tax cuts.
Had incomes stayed at 2000 levels, the average taxpayer would have earned almost $21,000 more over those eight years. That's almost $50 per week.
The changes in average and total incomes are detailed on the next page in Table 1, the first of four tables analyzing the whole data.
Now that we have looked at the whole eight-year period, what does the new data show about 2008, the worst recession ear since the 1930s, show when compared to the peak year of 2007, when the average taxpayer made $63,096, which was 2.5 percent more than in 2000.
In only two of the eight Bush years, 2006 and 2007, were average incomes higher than in 2000, but the gains were highly concentrated at the top. Of the total increase in income in 2007 over that in 2005, nearly 30 percent went to taxpayers who made $1 million or more.
Now surely some will say that it is not fair to saddle George W. Bush and those who supported his tax cuts with the economic figures from 2001 and 2008. The first would be on the theory that President Clinton should be charged for that year (just as Bush should be charged with 2009, the first year of the Obama administration). The second is on less solid ground, but let's consider it for the sake of argument.
Just measuring the second through seventh years we find that total income was still nearly $2 trillion lower than if 2000 level income continued. Stacking the deck in President George W. Bush's favor does not change the awful performance or even soften it much.
The tax cuts cost $1.8 trillion in the first eight years, according to an analysis by the Tax Policy Center, whose reliability the last administration went out of its way to praise. Those cuts were heavily weighted toward the people candidate George W. Bush famously called "haves and the have-mores . . . some people call you the elite. I call you my base."
In the two years since 2008, the cuts' total cost grew to $2.3 trillion, the Tax Policy Center estimated.
One of every eight dollars of the tax cuts went to the 1 in 1,000 taxpayers in the top tenth of 1 percent, the annual threshold for which was in the $2 million range throughout the last administration. The only other large beneficiary was parents with children under 17 who make enough to pay income taxes, thanks to the $1,000-per-child tax credit Republicans started championing in the mid-1990s.
Ignore the cynics who say the Republican leaders on Capitol Hill, in Wasilla, and on the airwaves care only about the rich. I don't believe that. I think they are captive to economic theories few of them understand and that are simplistic in the extreme. I take them at their word, that they truly believe their policies will produce broad benefits for all, but accepting that does not diminish the fact that the policies these Republicans promote also produce massive tax savings for the superrich who finance their campaigns.
The question to ask is whether their policies worked as promised. Have they even come close? Where is the prosperity -- and where was it in the Bush years, when massive increases in both military and discretionary spending provided a chronic stimulus to the economy?
