New Study Finds High-Income Tax Cuts Don’t Stimulate Economic Growth

By Travis Waldron/Think Progress

Congressional Republicans and their party’s presidential nominee have both pushed plans to cut taxes on the wealthiest Americans in hopes that such a move would stimulate the economy and aid the recovery from the Great Recession. A new study, however, indicates that tax cuts for the wealthiest earners fail to generate economic growth at the same pace as tax cuts aimed at low- and middle-income earners.

The study, conducted by Owen M. Zidar, a former staff economist on President Obama’s Council of Economic Advisers and a graduate student at California-Berkeley, examined economic growth in the states with the most high-income earners. Zidar reasoned that “states with a large share of high income taxpayers should grow faster following a tax cut for high income earners” if the tax cuts had the economic effect conservatives claim.

What he found, though, is that the effect of tax cuts for the rich was “insignificant statistically,” as Reuters’ David Cay Johnston reported:

“Almost all of the stimulative effect of tax cuts,” Zidar found, “results from tax cuts for the bottom 90%. A one percent of GDP tax cut for the bottom 90% results in 2.7 percentage points of GDP growth over a two-year period. The corresponding estimate for the top 10% is 0.13 percentage points and is insignificant statistically.”

Zidar’s study provides more empirical backing to what the U.S. has experienced over the last 30 years. Supply-side tax cutting policies have not led to the growth their Republican proponents promised. The Bush tax cuts, for instance, were followed by the weakest decade for economic expansion on record.

Still, Republicans, some of whom admit that the Bush tax cuts didn’t lead to the desired growth, are sticking to their ideology. Republican presidential nominee Mitt Romney proposed a tax cut that is four times larger than the Bush tax cuts; the GOP has fought efforts to allow the high-income tax cuts expire at the end of the year, arguing that doing so would dampen growth; and Republican governors across the country have pushed tax cut packages aimed at the wealthy even as their states struggle with budget shortfalls.

Study: House Republican Budget Would Raise Taxes On The Middle Class, Cut Them For Millionaires

By Pat Garofalo/Think Progress


According to a study prepared by the congressional Joint Economic Committee and verified by independent experts, the House Republican budget authored by Budget Committee Chairman Paul Ryan (R-WI) would raise taxes on families making less than $200,000, even while it gives millionaires a tax cut:

So although households earning $100,000 to $200,000 a year would save about $7,000 from the lower tax rates in the GOP plan, those savings would be swamped by eliminating major deductions, according to the report by the Democratically controlled congressional Joint Economic Committee.

The net result: Married couples in that income range would pay an additional $2,700 annually to the Internal Revenue Service, on top of the tax increases that are scheduled to hit every American household when the George W. Bush-era cuts expire at the end of the year.

Households earning more than $1 million a year, meanwhile, could see a net tax cut of about $300,000 annually.

“Ryan seems to want to have his cake and eat it, too, and this report shows that you can’t,” added Sen. Charles E. Schumer (D-NY). “If you want to cut taxes on the rich and not raise the deficit, you’re going to have to basically clobber the middle class.”

According to the non-partisan Tax Policy Center, the Republican budget would also slam thosemaking less than $30,000 per year, because it doesn’t extend some of the tax cuts for low-income Americans that President Obama has signed into law:

Republicans, meanwhile, contend that these analyses are unfair because they have yet to lay out their entire plan, including exactly which tax deductions and loopholes they plan to do away with. But as the Tax Policy Center’s Roberton Williams said, “unless [Republicans] go after the tax preferences that benefit the wealthy, it’s really hard to undo the regressivity of the rate changes. You’ll be shifting the burden of the tax code toward the middle class.”

GOP Rep. Hultgren Draws Laughs At Town Hall With Plan To Beg, Not Require, Rich To Pay More Taxes

By Zaid Jilani/Think Progress

Earlier this week, Rep. Randy Hultgren (R-IL) held a town hall in Sandwich, Illinois, where constituents angrily denounced his right-wing policies. During one particularly amusing moment, Hultgren tried to defend his stand against raising taxes on the wealthy, drawing a round of laughs from the audience.

“I’m not out there trying to coddle anybody,” he defensively claimed. He then went on to explain that, instead of raising taxes on the wealthy, Congress could adopt a bill that would allow the rich to make voluntary donations to the Treasury and have them count as charitable contributions:

HULTGREN: I’m not out there trying to coddle anybody. In fact, I support a bill that allows the super rich if they want to give more money to the federal government it could be a charitable contribution.

(audience laughs)

HULTGREN: I think that makes sense! Use it as a charitable contribution.

Watch it:

Following an op-ed by billionaire Warren Buffet calling on Congress to raise taxes on the wealthy and accusing it of “coddling” the rich, many conservatives have reacted by lashing out at Buffet, demanding that he simply voluntarily pay more. Hultgren appears to be taking on this cry.

It’s unclear what bill exactly the congressman says he supports. ThinkProgress has contacted his office and is awaiting a reply

Sen. Thune Admits Bush Tax Cut Extensions Are More Of A Priority Than 9/11 Workers’ Health

By George Zornick

On Fox Business Network this morning, Don Imus aggressively questioned Senator — and possible presidential hopeful — John Thune (R-SD) about Republican obstruction of the James Zadroga 9/11 Health and Compensation Act of 2010, which would provide desperately needed health care to those who volunteered to help at Ground Zero in the aftermath of the terrorist attacks. Imus raised Daily Show host Jon Stewart’s recent point about Republicans who frequently invoke 9/11 imagery, but refuse to help the workers, and asked Thune how he could defend this refusal. Thune explained that preserving the Bush tax cuts was more of a priority:

IMUS: It seems to me and it seems to others that if we’re going to help anybody, we would certainly help these Americans who were the first responders to 9/11.

THUNE: The difference I think with the tax bill is there is a deadline, Jan. 1, we have to get this done, taxes go up on Jan. 1, that’s a matter of law. We need to get the issue addressed for the firefighters and the 9/11 victims and we will. But again there’s a right way and a wrong way to do this, and there’s a way in which you can pay for these things, and try and get this thing to where it doesn’t cost quite as much, where it doesn’t provide as much exposure, as much liability – there are some things in this bill that we think can be improved upon. We need an opportunity to do that.They want to rush through all these things at the end of the year, without debate, without amdendments, with the opportunity to go through a normal process. And I think we can do that, we can do many of these last-minute initiatives they’re trying to push through, we can do them next year.

IMUS: I know there’s a deadline on the tax situation, but there’s also a deadline on the health of these firemen and these police officers.

Watch it:

Thune’s admission that tax cuts are a higher priority is stunning, as are his admonitions against “rushing” the Zadroga bill. As Imus correctly notes, there’s a very real deadline on the health of 9/11 volunteers who are desperately awaiting health care assistance from the country they served over nine years ago. For example, just this fall, Joe Picurro, a 9/11 volunteer who was central to the push for health care assistance — and who himself suffered for years with little or no health care — passed away. As the New York Daily News reported:

Joe Picurro volunteered to cut steel at Ground Zero more than nine years ago. It cost him his life Friday morning. [...]

“He fought up until the day he went,” said wife Laura Picurro. “I’m going to miss him, like unbelievable.”

Because Picurro volunteered, he had to fight for years to get any aid after 9/11 charities closed.

Even as his lungs deteriorated and late-night rushes to the emergency rooms grew all too familiar, he and Laura still had to fight bureaucrats who refused to recognize the source of his problems. When he finally got workers’ compensation in 2006, he was down to his last nickel.

Laura had to scrimp, scrape and borrow to make ends meet, care for Joe – and stave off eviction. “I don’t know how we made it, still in this house, the lights still on,” she said, her voice cracking.

But Picurro’s tale made him one of the symbols of how the heroes of 9/11 were being forgotten. He joined the push on Congress to pass the James Zadroga Health and Compensation Act. His death was a blow to a community that has seen all too much tragedy, with hundreds of 9/11 responders having died over the years.

As the report notes, Picurro and other volunteers have been waiting for years for assistance from the federal government. Thune’s whining that Democrats are “rushing” the Zadroga bill through is patently ridiculous. The bill, or very similar versions, were first introduced in the House over four years ago, and have suffered repeated Republican obstruction ever since. Nevertheless, Thune apparently finds the preservation of low tax rates for the wealthy to be a more pressing matter.

Deficit Fraud Romney: Jobless Benefits Are Too Expensive, But The Bush Tax Cuts Increase Revenue

By Pat Garofalo Yesterday, the Senate approved the tax deal that President Obama negotiated with Congressional Republicans by an 83-15 vote. The legislation now moves to the House, where Democrats are saying that they might tinker with the estate tax cut that Republicans are insisting upon.

But it isn’t only on the left that opposition to the deal exists. A few House Republicans have disparaged the deal for including too few tax cuts and too much help for the jobless. In a USA Today op-ed today, former Gov. Mitt Romney (R-MA) — who is consistently mentioned amongst GOP 2012 hopefuls — came to the same conclusion, saying that a two-year extension of all of the Bush tax cuts is too short, while a one-year extension of unemployment benefits is too expensive:

One thing is certain: While we cannot rebuild our flawed system [unemployment insurance system] overnight, we are surely not required to borrow the funds to pay for it. In spending $56.5 billion to extend benefits, the deal is sacrificing the bedrock Republican principle that new expenditures be paid for with offsetting budget cuts.

Romney also criticizes the deal’s payroll tax reduction for adding to the deficit. But then, in order to get around the fact that he favors permanent extension of the entire Bush tax cut package (at a cost of $4 trillion over the next decade), Romney asserts that such an extension will actually increase revenues:

In many cases, lowering taxes can actually increase government revenues. If new businesses, new investments and new hiring are spurred by the prospects of better after-tax returns, the taxes paid by these new or growing businesses and employees can more than make up for the lower rates of taxation.

As The Wonk Room explained, when it comes to the Bush tax cuts, revenue surely did not increase. Romney is simply twisting himself in circles to justify his opposition to the tax deal on fiscal responsibility grounds, while simultaneously advocating for a full extension of the Bush tax cuts, no matter their effect on the deficit.

DeMint Wants Tax Deal To Reduce The Deficit And Permanently Extend The Bush Tax Cuts

By Ben Armbruster

While most Republicans on Capitol Hill have signaled support for the tax cut deal that their leadership brokered this week with President Obama, a small minority are opposed. Tea Party favorite Sen. Jim DeMint (R-SC) said he is against the deal because it includes a provision to extend unemployment benefits for 13 months. “We can’t just keep paying people to stay at home,” he said.

Last night on Fox News, DeMint expounded on his concerns about the deal. “This is a perfect example of how we got 14 trillion in debt as a nation,” he said. But then his reasoning quickly turned contradictory. “Republicans have something we know is good for the country, such as extending these tax rates.” Later in the interview, DeMint solidified his inconsistency. He said the measure should not increase the deficit; but, in his very next breath, he added that the deal should make the tax cuts permanent:

DEMINT: Rather than support something that is a bad deal, I think I would put my bets on a republican house fixing this thing the second week in January, when we are back in session. But I’d like to get the deal done now. But it should, in my mind not increase the deficit. And we should at least have a vote on making these rates permanent. If we do that, I think it will really help the economy the way it is structured now, I think it could actually hurt the economy by expanding the deficit. So, you know, I’ve heard countless times since I’ve been in Congress, this is the best deal we can make but frankly, with $14 trillion in debt, this is not what we need to do. We need to fight a little bit harder before we let this thing go.

Watch it:

DeMint did not say that there should be spending cuts to offset the federal revenues lost from the tax cuts, which for the wealthy alone, account for more than $800 billion over the next 10 years. Cutting taxes will increase the deficit; they are mutually constitutive. Yet, DeMint thinks the tax deal should decrease the deficit and make the Bush-era tax cuts permanent.

While the President’s priorities in the deal would help about 150 million more Americans than the GOP’s priorities would (and at less cost per person), the congressional Joint Committee on Taxation said that the tax deal would cost the government $801.3 billion over 10 years. While the 13 month unemployment benefit extension would cost $56 billion, the JCT said the two year extension of the tax cuts would cost more than $400 billion.

“This feels more than a bit surreal,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, about the tax deal’s cost. “On the heels of the work of the White House Fiscal Commission last week on how to get control of the national debt, the White House and Members of Congress choose to engage in a negotiation that involves adding increasingly larger amounts to the debt? It’s utterly exasperating.”

Thune Demands Unemployment Benefits Be Paid For, But Not The Bush Tax Cuts For The Wealthy

At the end of November, unemployment benefits expired for 2 million Americans in the midst of the holiday season, thanks to repeated Republican obstructionism in the Senate. The White House tax compromise announced this week will extend these benefits for 13 months, but a number of Republicans are opposing the extension because it would increase the deficit, and are even threatening to scuttle the entire deal over aid for the jobless.

“I don’t think we need to extend unemployment any further without paying for it,” Sen. Jim DeMint (R-SC) told conservative talk radio host Hugh Hewitt Tuesday. “Thank you, @JimDeMint” former Alaska Gov. Sarah Palin tweeted yesterday in response. “Obviously Obama is so very, very wrong on the economy & spins GOP tax cut goals; so fiscal conservatives: we expect you to fight for us & America’s solvency,” Palin followed up in another tweet.

Of course, at the same time, these self-described “fiscal conservatives” have been demanding a permanent extension of the Bush tax cuts for the wealthy, which would add $830 billion to the deficit over ten years. The White House compromise only extended them for two years, at a cost of $120 billion. The unemployment extension would cost far less — only $55 billion.

Nonetheless, on Fox News host Sean Hannity’s show last night, Sen. John Thune (R-SD) joined DeMint and Palin, saying “we need” to pay for unemployment benefits, while completely ignoring the cost of the Bush tax cuts:

HANNITY: What do you think of what Jim DeMint and Governor Palin had said about this that, you know, we need to extend unemployment. We can’t do it without funding it. Number two, we don’t need temporary economy. We don’t need temporary tax rates, businesses need to look five, 10 years down the road. What do you think of that criticism?

THUNE: I don’t disagree with any of that. … But I do agree with what Senator DeMint is saying and that is we need to try and come up with a way to pay for this $55 billion extension of unemployment benefits. We will be offering amendments in the Senate to do just that.

Watch it:

Of course, Thune did not say he would offer an amendment to pay for the Bush tax bonus for the rich. As the Wonk Room’s Pat Garofalo noted yesterday, “Unemployment benefits are providing a vital lifeline to millions of Americans struggling in a weak economy,” but Thune, DeMint, and their cohorts “would cut them off, while lavishing tax breaks on the wealthy.”

Republicans Claim Lousy Jobs Report Means Bush Tax Cuts For The Rich Must Be Extended

By Pat Garofalo

Today’s jobs report from the Bureau of Labor Statistics paints an ugly picture of lackluster job creation and increasing long-term unemployment. The Federal Reserve — which is taking its own steps to boost employment after dithering for months — has been reduced to pleading with Congress for further fiscal stimulus, in the hopes of averting an even longer jobs slog.

So, naturally, Congress is spending the day debating whether or not the richest two percent of Americans should receive a tax cut (in addition to the tax cut they will receive on their first $250,000 in income if, as everyone in Congress wants, tax rates are extended for the lower- and middle-classes). In fact, many House Republicans are claiming that the richest two percent of Americans desperately need a tax cut because of the bad jobs report:

House Minority Leader John Boehner (R-OH): Any sign of job growth in this struggling economy is encouraging, but clearly no match for the uncertainty families and small businesses are facing, which is why we must cut spending and stop all the looming tax hikes.

House Minority Whip Eric Cantor (R-VA): Today’s jobs report marks the 19th consecutive month in which unemployment has exceeded nine percent — an unacceptable result. We must do everything possible to bring that number down and get people back to work by ending the uncertainty that is plaguing the private sector. To start, Congress should reassure job creators and investors by taking the impending tax hikes off the table.

Rep. Mike Pence (R-IN): Today’s heartbreaking unemployment report should be yet another wake-up call to Democrats that raising taxes in the middle of the worst economy in 25 years is a mistake. Higher taxes on America’s small businesses won’t get anyone hired. I call on Washington Democrats to abandon their plan to raise taxes on small businesses and get America back to work.

Rep. Tom Price (R-GA): Nationwide, the unemployment rate has stayed at 9.4 percent or higher for 19 straight months. Yet instead of sensible policies to encourage private sector job creation, Democrats have pushed one job-killing idea after another…Well, higher taxes don’t hire Americans.

Sens. Mitch McConnell (R-KY) and Orrin Hatch (R-UT) took this line of thinking to the Senate floor today. Watch it:

As The Wonk Room noted, there was no attempt on the part of these Republicans to grapple with the fact that the Bush tax cuts ushered in the weakest period of job growth in the post-war period, or that the Congressional Budget Office ranks extending the Bush tax cuts as the least effective tax measure for promoting economic growth.

Fox News' Deficit Reduction Plan: Extend Tax Cuts For The Rich

From Media Matters: Fox News' Megyn Kelly claimed that tax cuts "on the so-called rich" increase federal revenues. In fact, tax experts and economists note that tax rates are not high enough for a tax cut to increase revenues, and President Bush's own economic advisors have said the Bush tax cuts did not raise revenue.

Kelly Suggests Extending Bush Tax Cuts For Wealthy Will Raise Revenues

Kelly: "Tax Cuts For The Rich Led To Increased Federal Revenues." From Fox News' America Live:

KELLY: Here's the interesting thing. I mean, you know, it's very easy to demonize the rich. And you hear somebody is making more than a million dollars and you think, they should pay more -- better them than the middle class. They can afford it and the middle class can't.

But doing some research on this issue lately, Mike, I saw the following fact. Now they cited at least four presidents who decided to lower taxes on the so-called rich. All right? You can see -- you got Calvin Coolidge, JFK, Reagan, and Bush. You've got Democrats and Republicans. And those four presidents, at least, decided to lower taxes on the rich -- the group we're talking about right now -- and according to the reports, in all four of those administrations those tax cuts for the rich led to increased federal revenues, increased federal revenues, with people earning high incomes paying a bigger sum of the total tax revenues and a higher proportion of all the tax revenues.

So if the theory is that if you really want to soak the rich, lower their tax rate because it will lead them ironically to wind up paying more taxes and to take on more of the tax burden. [Fox News' America Live, 11/30/10]

Revenues Almost Always Increase Regardless Of Changes In Tax Rates

PolitiFact.com: "You Should Expect Tax Revenues To Go Up Each Year Due To Economic Growth And Inflation." On November 9, PolitiFact.com fact-checked Rep. Mike Pence's claim that "raising income tax rates will likely actually reduce federal revenues," countering that "you should expect tax revenues to go up each year due to economic growth and inflation, even if tax rates stayed the same":

But we consulted the tax experts, who told us you can't just look at the raw numbers, for several reasons. First, you should expect tax revenues to go up each year due to economic growth and inflation, even if tax rates stayed the same. Second, there's not a straight line between tax rates and tax revenues. You can raise taxes the same year the economy tanks and get less revenue, or you can cut taxes during a time of economic growth and get more revenue. And those changes in the economy aren't necessarily caused by what the government is doing with tax rates -- the upturns could be due to new inventions and innovations, and the downturns could result from financial panics and real estate bubbles that have little to do with tax rates. And economists have to go to quite a bit of trouble to separate out the effects of tax policy from other things happening in the world. [Politifact.com, 11/9/10]

FactCheck.org: "Revenues Have Declined In Only Five Years Since 1962." Rebutting Sen. John McCain's claim that the Bush tax cuts have "increased revenues," FactCheck.org wrote:

Federal revenue normally increases every year. In fact, revenues have declined in only five years since 1962. The 35 percent growth between 2003 and 2006 is significant - the last major growth in revenue was between 1997 and 2000, when the economy was booming and federal receipts rose 28.2 percent. But the recent three-year period also comes after three years of decreases, a drop Viard attributes to the 2001 tax cuts and the start of a recession that same year. [FactCheck.org, 06/11/07]

Economists: Tax Cuts Now Would Not Generate Revenue

Time: Tax Cuts Can Raise Revenue In Cases Of "Punitively High Marginal Rates." From a December 2007 post on Time's Curious Capitalist blog:

I'm certainly not going to say that no tax rate cuts have ever raised revenues. Would Mark Thoma say that?

Just two off the top of my head: The 1964 Kennedy reduction of the top marginal income tax rate from 91% to 70% (it was enacted after JFK's assassination, but it was his bill), the 1981 Reagan reduction of the top marginal rate from 70% to 50%. I'm not at all an expert on this, but I don't think it's too controversial among economists to assert that those particular changes (but not the rest of the of Kennedy and Reagan tax legislation) were a break-even or better for the Treasury. (Brad DeLong on the 1980s tax cuts: "As I read the evidence ... reducing the top tax rate from 70% to 50% is probably a revenue gainer and surely not much of a loser. From 50% to 28% is, I think, very different: a big revenue loser.")

The common thread is that these were cuts in punitively high marginal rates. They paid off in large part because they removed incentives to shelter income from taxes. The other benefits that supply-siders like to talk about -- making people work harder and longer and encouraging capital investment -- are there too, but probably not in great enough measure to offset the tax cut.

Which is why it's awfully hard to imagine any cut in current tax rates (or the rates that were prevailing when George Bush took office in 2001) that would pay for itself. The only possible candidate, I think, would be the corporate tax rate. [Time, 12/10/07]

Tax Foundation: "Few If Any Of Today's Tax Rates Are So High That Cutting Them Would" Cause Increase In Revenue. In May, the Tax Foundation stated:

There is no definitive answer to the question of how much the Bush tax cuts cost the Treasury in foregone revenue from 2001 to 2010.

First, there is much disagreement pertaining to the feedback effect that resulted from the tax cuts. No tax cut that has significant marginal rate cuts, as the Bush tax cuts did, will cost the Treasury its full "static" score. Static in this sense means that people don't change their behavior when tax rates drop or rise: if a 40% tax rate raises $500 billion, then a 20% tax rate would raise $250 billion. This is wrong because people do change their behavior when faced with such starkly lower tax rates. They earn more money, which generates additional tax revenue. Just how much is hard to estimate.

When the Kennedy tax cut dropped the top income tax rate from 91% to 70%, or when the Reagan tax cut dropped it from 70% to 50%, it is quite possible that the lower rates raised more revenue than the old, higher rates would have. On the other hand, few if any of today's tax rates are so high that cutting them would generate a surge of income-producing activity so large that revenue would rise. There will certainly be a feedback effect, just not such a massive amount. [Tax Foundation, 05/26/10]

Tax Policy Center's Williams: No Established Economist "Would Argue That We're Near" The Level Where Tax Cuts Raise Revenue. In its fact-check of Pence's claim, PolitiFact further reported:

Interestingly, [Reagan budget director David] Stockman agreed with a little bit of Pence's underlying assumption that increases in taxes can inhibit economic growth. But he disagreed that tax revenues would decrease if the government raised taxes. "I just have to respectfully disagree," Stockman said. "You will have some loss of revenue because some activity or transactions won't happen, but if you raise taxes on paper by $100 billion, maybe you'll get $90 billion or $85 billion. But it's just common-sense fact that, when you raise the rates, you get more revenue. Normally, it's a bad thing to do. But we are in such dire shape that we have no choice but to accept the negative trade-off of some harm to the economy to start paying our bills."

The tax experts we spoke with agreed with Stockman. In this climate, raising the top tax rates from 35 to 39.6 percent would increase revenues. The effect Pence is talking about would not happen at this level of taxation, they said.

"There is some rate at which it would be true," said Roberton Williams of the nonpartisan Tax Policy Center. "But I don't think there are any established economists who would argue that we're near that."

"At current tax rates, most tax increases will increase revenues, at least in the short and medium run," said Brian Riedl of the conservative Heritage Foundation. "The caveat is that in a fragile economy, it can be unpredictable." [Politifact.com, 11/9/10]

Former Treasury Department Official: "Only In Very Exceptional Circumstances" Would A Tax Cut Pay For Itself. Bruce Bartlett, who has worked for the Heritage Foundation and served as deputy assistant secretary for economic policy at the Treasury Department, has written:

The fact is that it is only in very exceptional circumstances that there would even be the possibility of a tax cut that would so stimulate growth that it would pay for itself. Even the Bush Administration admits this. The 2003 Economic Report of the President (pp. 57-58) says, "Although the economy grows in response to tax reductions ... it is unlikely to grow so much that lost tax revenue is completely recovered by the higher level of economic activity."

Recent academic research suggests that feedback effects would offset only a fraction of the static revenue loss, that which would result from no effect on consumption or incentives. [RealClearPolitics.com, 03/28/06]

Even Bush And Reagan Economists Reject Notion That Tax Cut Packages Raised Revenue

Former Bush Economist Viard: "There's No Evidence That These Tax Cuts Would Come Anywhere Close" To Paying For Themselves. Alan Viard, a former Bush White House economist, was quoted in The Washington Post as saying:

"Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that," said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute. "It's logically possible" that a tax cut could spur sufficient economic growth to pay for itself, Viard said. "But there's no evidence that these tax cuts would come anywhere close to that." [The Washington Post, 10/17/06]

Former Bush Economist Holtz-Eakin: "You Are Not Going To Get Tax Cuts To Pay For Themselves." In a Boston Globe column, former Bush economist Douglas Holtz-Eaken was quoted as saying: "You're not going to get tax cuts to pay for themselves":

The supply-side notion doesn't even work in responsible theory. In 2005, the Congressional Budget Office evaluated the effects of a 10 percent income tax cut on federal revenues, using a number of different assumptions. Here's CBO's conclusion, from a summary by then-director Douglas Holtz-Eakin, a well-regarded conservative economist: "The budgetary impact of the economic changes was estimated to offset between 1 percent and 22 percent of the revenue loss from the tax cut over the first five years and add as much as 5 percent to that loss or offset as much as 32 percent of it over the second five years."

So under the most optimistic assumptions, the economic stimulus from such a tax cut would replace about one-fifth of the lost revenue in the first five years and about one-third in the second. In the worst case, there would be no longer-term revenue replacement at all, but rather an even greater loss.

Now, Holtz-Eakin believes there are good economic reasons to keep taxes where they now are. But as he told me in an interview, "You are not going to get tax cuts to pay for themselves." [Boston Globe, 12/07/07]

Bush's CEA Chairman Lazear: "We Do Not Say The Tax Cuts Pay For Themselves." During testimony before the Senate Budget Committee, Ed Lazear, the chairman of Bush's Council of Economic Advisers (CEA) stated:

LAZEAR: Will the tax cuts pay for themselves? As a general rule, we do not think tax cuts pay for themselves. Certainly, the data presented above do not support this claim. Tax revenues in 2006 appear to have recovered to the level seen at this point in previous business cycles, but this does not make up for the lost revenue during 2003, 2004, and 2005. The tax cuts were a positive step and have contributed to the enhanced economic growth, additional jobs, higher real disposable income, and the low unemployment rates that we currently see today. Our goal is not to maximize the size of government, but to provide revenues to make sure that we can operate those programs that society deems necessary, while at the same time allowing the private sector to take full advantage of its growth potential. [Testimony before Senate Budget Committee, 09/28/06]

Reagan CEA chairman Feldstein: "It's Not That You Get More Revenue By Lowering Tax Rates, It Is That You Don't Lose As Much." The New York Times reported in March 2008:

While Mr. Laffer insists that tax revenue will rise when tax rates are cut, other supply-siders are less categorical. Martin Feldstein, a Harvard economist who was the first chairman of President Reagan's Council of Economic Advisers and now supports Senator McCain, estimates that a 10 percent tax cut would in fact reduce tax revenue -- but only by 3 to 5 percent.

"It is not that you get more revenue by lowering tax rates, it is that you don't lose as much," he said. [The New York Times, 03/26/08]

Feldstein also reportedly wrote in 1986 that "[t]he height of the supply-side hyperbole was the 'Laffer curve' proposition that the tax cut would actually increase tax revenue because it would unleash an enormously depressed supply of effort. ... I have no doubt that the loose talk of the supply-side extremists gave fundamentally good policies a bad name and led to quantitative mistakes that not only contributed to subsequent budget deficits, but also made it more difficult to modify policy when those deficits became apparent."

Pence Prioritizes Tax Breaks For Millionaires Over Extending Unemployment Benefits

By Pat Garofalo

At 12 a.m. this morning, extended unemployment benefits officially expired, meaning that 2.5 million Americans will see their benefits disappear by the end of the month. This will not only hurt the individual families — while unemployment is still above nine percent and there are five job seekers for every job opening — but will also harm the wider economy. Economists estimate that allowing benefits to expire could cause economic growth to “fall by one half to nearly 1 percentage point,” as well as throw hundreds of thousands of people into poverty.

Cutting off benefits will also negatively affect small businesses, because, as MarketPlace noted, “when unemployment checks stop, it’s felt right away by businesses like gas stations, apartment operators, and grocery stores.” But Republicans in Congress have been screaming that the country can’t afford to extend benefits unless they are offset with spending cuts elsewhere.

Of course, these same Republicans have no problem extending the Bush tax cuts for the wealthy without corresponding spending cuts. And today, on MSNBC, Rep. Mike Pence (R-IN) — who has been serving as House Republican Conference chairman and is being touted as a possible 2012 Presidential nominee — twice refused to endorse extending unemployment benefits if it meant that taxes went up on only millionaires:

HALPERIN: If your leaders came to you and said ‘we have a deal with the White House. We’re going to extend unemployment benefits but the tax cuts for people making over a million dollars a year will not be extended, but that helps to pay for it,’ would you take that deal? Would you vote for that package?

PENCE: Look, I think the worst thing you could do for people that are struggling in this economy and looking for a job is raise taxes on any American. We don’t want to help with one hand and take away with the other.

HALPERIN: So would rather extend the tax cuts for every American, including those making over a million, or have the unemployment benefits extended, if that’s the choice?

PENCE: This isn’t a corner, but I feel the paint. I’m good. Nice move. I played chess with my son the other day and I lost, so I’m not good at this chess thing. Let me tell you, I think the minimum we have to do for Americans right now that are struggling in unemployment in this economy is make sure no American sees a tax increase.

Watch it:

As The Wonk Room pointed out, the average millionaire will receive $103,809 in tax breaks next year if the Bush tax cuts are extended. Unemployment benefits, meanwhile, average about $290 per week.

Republicans Use Senate Backlog They Created To Extort Tax Cuts For The Super-Rich

By Ian Millhiser

Earlier this week, every single Senate Republican released a letter indicating that they would block all Senate business until the wealthiest Americans receive additional tax cuts:

[W]e write to inform you that we will not agree to invoke cloture on the motion to proceed to any legislative item until the Senate has acted to fund the government and we have prevented the tax increase that is currently awaiting all American taxpayers. With little time left in this Congressional session, legislative scheduling should be focused on these critical priorities. While there are other items that might ultimately be worthy of the Senate’s attention, we cannot agree to prioritize any matters above the critical issues of funding the government and preventing a job-killing tax hike.

Almost immediately, Majority Leader Harry Reid (D-NV) responded to the GOP’s obstruction on the Senate floor. “With this letter, they have simply put in writing the political strategy that the Republicans pursued this entire Congress: Namely, obstruct, delay action on critical matters, and then blame the Democrats for not addressing the needs of American people,” he said. And Reid is right. The sole reason why the Senate does not have enough time to complete the many pressing matters it still faces is because Republicans spent the last two years slowing Senate business to a near standstill.

GOPers claim that their most recent gambit is motivated by concern over the economy, but they don’t even attempt to defend their decision to block confirmation of one of the nation’s most important economic policy makers — Nobel Prize winner and Federal Reserve Board nominee Peter Diamond. Simply put, giving one of the world’s leading economists an opportunity to shape U.S. monetary policy would do a whole lot more to benefit the economy than giving yet another tax cut to Paris Hilton.

Similarly, it’s been more than two months since the Senate has held a single judicial confirmation vote, even though 34 nominees have already cleared the Judiciary Committee, 26 of them unanimously. Indeed, President Obama’s judges have been confirmed slower than any president’s in recent memory — and at less than half the rate of President Bush’s nominees. On the legislative side, the picture is just as bleak. Nearly 400 bills which passed the House of Representatives — many of them unanimously — have yet to even receive a vote in the Senate.

Republicans were able to create this logjam because the Senate rules enable them to force up to 30 hours of pointless delay before the Senate can vote on nearly anything. Thirty hours may not sound like a lot, but it is utterly crippling when multiplied across the hundreds of votes the Senate must take just to keep the country running. Indeed, at 30 hours per nominee, it would take more than two entire presidential terms to fill all the Senate-confirmed jobs a new president must fill, and that’s assuming that the Senate gets nothing else done during this entire nine year period:

The good news is that a brief window opens up next month which will allow the Senate to amend its rules with only 51 votes. Sadly, however, next year’s battleground is likely to shift to the House, where GOPer’s are already threatening to take the entire U.S. economy hostage if the nation does not agree to an as-yet unspecified list of demands.

Incoming Labor Committee Chair Says Jobless Benefits Aren’t A Priority: ‘We Can’t Fund Everything’

By Pat Garofalo

Yesterday, the House of Representatives failed to pass a (far too short) three-month extension of unemployment benefits. If Congress does not act to extend benefits by the end of the month, 2.5 million Americans will lose their benefits, right in the midst of the holiday season.

At the same time, Congress is intensely debating whether or not to extend the Bush tax cuts for the richest two percent of Americans, at a cost of $830 billion over the next decade. Earlier this week, Rep. Michele Bachmann (R-MN) called for a permanent extension of the tax cuts for the rich, while deriding extending unemployment benefits as “some new massive spending.”

And in an interview with Minnesota Public Radio, the incoming chairman of the House Education and Labor Committee, Rep. John Kline (R-MN), pronounced that extending benefits is not a priority for the incoming Republican Congress because “we can’t fund everything.” “We just don’t have the money,” Kline said:

KLINE: That’ll be a tougher lift in the 112th Congress. We’ve had unemployment benefits be extended for almost two years in some states, a little bit less in Minnesota. When you’re running a one and a half trillion dollar deficit per year, that’ll be part of the discussion as to whether that’s a priority for how we’re going to spend money. I would just reiterate what I said earlier, that the obligation for the Congress is to look at the entire budget and recognize that we’re borrowing over forty cents of every dollar that we spend, and say what are the priorities going to be. We can’t fund everything.

Q: But what do you tell those folks hanging on by a thread who really need those benefits?

KLINE: Well, they, heh, the best thing to do for them is to get the economy back on track and get businesses hiring so that they have a job that they can go to. We simply don’t have the money to keep extending unemployment benefits indefinitely. We just don’t have the money.

Listen here:

Kline also supports extending the Bush tax cuts for the rich. So in his world, $830 billion to finance tax cuts for the wealthy is fine, but $12.5 billion to extend unemployment benefits for three months is too expensive.

Rep. Mike Pence (R-IN) is also a part of this crowd, supporting a full extension of the Bush tax cuts, but saying today, “we’re facing a fiscal crisis. If we’re going to choose to extend unemployment, we’ve got to find a way to pay for it.” Rep. Charles Boustany (R-LA) added, “we can both provide this help and pay for it by cutting less effective stimulus spending. That’s what we should be debating today.”

In the last forty years, the U.S. has never allowed extended benefits to expire with the unemployment rate above 7.2 percent, far below today’s rate of 9.6 percent. Plus, there are currently five unemployed persons for every job opening in the country. In fact, there are so few job openings, that even if every open position in the country were filled, four out of five unemployed workers would still be out of work. But for Kline and the other House Republicans, extending tax cuts for the rich is much higher on the priority list then ensuring that these households have an adequate safety net.

M.C.L Comment: I wonder how many people that depended on these benefits either stayed home or decided to send the Democrats a message by voting Green or Repug? The Republicans got money for funding war and making sure Paris Hilton get a tax cut but if you're hard working American that lost their job and you need help from your government the Republicans say sorry we don't have money for you. Remember this in 2012 and vote these Republican slime balls out.

Bachmann: Tax Cuts For Wealthy Must Be Extended, But Not If Tied To ‘Massive Spending’ On Unemployed

By Tanya Somanader As Congress launches into the lame duck session, congressional Republicans are demanding an extension of all the Bush tax cuts, even for the wealthiest two percent of Americans, at an added cost to the deficit of $830 billion over the next ten years. Meanwhile, they have refused to support a continuation of

unemployment benefits, which are set to expire next month, claiming that a continuation “will only add to the deficit.”

This morning, in an interview with Tea Party Caucus leader Rep. Michele Bachmann (R-MN), ABC’s Good Morning America host George Stephanopoulos picked up on the discrepancy between caring about the deficit when adding to it helps the poor, but not when it helps the rich. Asked if she would support a compromise which extended both the tax cuts and the unemployment benefits, Bachmann said no, characterizing letting the tax cuts expire as a “massive tax increase,” while dismissing extending unemployment benefits as “massive spending”:

BACHMANN: As far as a compromise goes, I want to get the current tax policy as far into the future as we can, if we can only get it extended for two years, that’s great. But I don’t think the American people should have to pay for that to have some new massive spending tied to it. If that’s the case, I don’t think you’re going to see the Republicans go along with it.

STEPHANOPOULOS: But why is it OK for the wealthiest Americans earning over $250,000 a year — remember the President has called for extending all tax cuts for those under $250,000 — for them to get tax cuts extended but for people out of a job and needing unemployment benefits not to have their benefits extended?

BACHMANN: Well remember again what this is. It’s a massive tax increase and its on the people who are job creators. And people want to think that these are millionaires sitting in leather chairs lighting their cigars with $100 bills, that’s not what we’re talking about. These are people who are carpet layers who may be employed two or three other guys, or a plumber, maybe himself and his brother, and it’s $250,000 in gross sales for their business. Their the ones looking at massive tax increases. …That’s going to hurt more people than anything if we can’t have job creation. And this is a job killer if we raise taxes on the job creators.

Watch it:

Bachmann’s argument for tax extension is, in one word, “bogus.” As the Wonk Room’s Pat Garofalo points out, conservatives’ claim that the tax increase will hurt small businesses is “only accurate if you take an incredibly expansive view of what constitutes a small business.” In reality, “exceedingly few small businesses” would actually be affected by letting the tax cuts expire. Meanwhile, the cuts represent “the least effective tax or spending step for job creation,” according to the Congressional Budget Office (CBO). Every dollar spent extending the tax cuts results in just 10 cents to 40 cents of economic activity, the CBO found.

Unemployment extension for those seeking jobs, however, represents the biggest bang for the buck of any government stimulus policy. According to the CBO, “the economy would see output rise by between $0.70 to $1.90.” That is part of the reason why an overwhelming majority of Americans support extending unemployment benefits for more than 2 million Americans in need, regardless of its effect on the deficit.

Billionaire Astroturf Group Claims Tea Partiers Voted To Give Billionaires Tax Cuts

By Brad Johnson

Americans for Prosperity, the Astroturf group run by pollution billionaire David Koch, claims that voters rejected “tax-the-rich ideas” in the midterm elections. On NovemberSpeaks.com — a website launched the day after the election — AFP rallies its supporters to oppose any action by Congress during the lame-duck session that begins November 15, while Democrats still control the House of Representatives. Not only does AFP falsely claim that Democrats intend to pass “enormous Social Security tax hikes,” it also makes the absurd claim that the midterm elections were driven by popular support for the Bush tax cuts for millionaires and billionaires:

1. These are the first votes of the 2012 cycle and public anger is not going away. 2. You have no right to raise taxes on any American while the economy remains weak and after class-warfare, tax-the-rich ideas were decisively rejected in a national election. 3. It’s wrong to cheat the American people by voting to fund ObamaCare before a new Congress elected not to fund it can be seated.

In fact, voters from Wisconsin to New York, from California to Indiana, were overwhelmingly concerned about the state of the economy, much as they have been since 2008. They are worried because of the millions of people who lost jobs and homes during the Bush recession — not because David Koch, a 70-year-old with a net worth of twenty billion dollars, might see his taxes return to levels during the Clinton era. They believe that Congress isn’t doing enough to fix the economy — not that that Congress needs more vacations.

During the lame-duck session of the 111th Congress, elected officials still have the opportunity to get the United States working again with the enactment of progressive pro-jobs policies. However, the billionaire-driven tea party front groups — like FreedomWorks, which warns Democrats will use the lame duck session to “Pile on More Tax Hikes to Fund their Socialist Agenda!”, the Traditional Values Coalition, which says the lame duck agenda is “more spending, blanket amnesty for illegal immigrants, new taxes, and anti-Christian laws,” or American Solutions For Winning the Future, which calls the lame duck “the worst kind of political corruption” — want the corporate takeover of Congress to begin now, instead of next year.

Update Huffington Post's Sam Stein reports on the right-wing mobilization against the lame duck session:

"We do not feel it was right that a Congress defeated would come back and basically try and nullify the election. This lame duck session is a payback to various constituencies and a down payment for 2012," said Andrea Lafferty, executive director of the Traditional Values Coalition. "If Democrats begin pushing items, I think people are going to freak... We are also looking at this in long term, if there are people who go along with this charade, this scam, people will remember in two years. People are going to remember. This is not going away... You might even see pitchforks at the capital, who knows."

GOP congressman can’t or won’t say how ‘Pledge’ will pay for tax cuts

By David Edwards and Muriel Kane

Even before the Republican Party's "Pledge to America" was officially released on Thursday, Democrats were painting it as a return to the failed policies of the Bush years.

"The Republicans running for Congress, they want the next two years to look like the eight years before I took office," President Obama charged at a Wednesday fundraiser. "The chair of one of their campaign committees already told us their intentions. He said that if the other party takes control of Congress, they plan to pursue -- and I’m quoting here -- the 'exact same agenda' as they did during the last administration."

"You heard the president," ABC's George Stephanopoulos asked Rep. Paul Ryan (R- Shemp Howard look a like) on Thursday morning. "How is it different?"

Ryan, who is the ranking Republican on the House Budget Committee, responded that "cutting spending, creating jobs, putting the policies of economic growth in place, and cleaning up the way Congress works ... stands in sharp contrast to the way Republicans conducted ourselves a decade ago. ... We spent too much money. We lost our way."

Although Ryan spoke of cutting spending, however, his ideas for reviving the economy appeared to revolve around extending the Bush tax cuts for the wealthiest Americans, along with repealing a few programs, like health care reform and the stimulus, that are particularly unpopular with Republicans.

"The two central items on the agenda," Stephanopoulos noted, "are extending the tax cuts passed under President Bush, repealing the health care passed under President Obama. Those are going to cost at least four trillion dollars over the next ten years, and your pledge doesn't spell out anything close to paying for that four trillion dollars."

"I brought a budget to the floor last year that cut $4.8 trillion in spending," Ryan replied.

This was a reference to his "Roadmap for America's Future," released last February, which proposed privatizing Social Security, turning Medicare into a voucher system that would by design not keep pace with actual health care costs, and enacting what Think Progress described as "draconian real cuts in all domestic programs."

"You do concede that you do not have a path to balance the budget and you don't pay for the tax cuts that you're extending," Stephanopoulos remarked, adding that even "the rest of the Republicans aren't signing onto" the "Roadmap."

"We do actually have a plan to get this country back on track," Ryan insisted. "We want to balance the budget by controlling spending."

His chief emphases, however, continued to be on tax cuts. "The problem we have right now is jobs," he stated. "We need job creation. Taxing capital gains, taxing dividends, taxing small businesses will hurt us from creating jobs."

"There's a big uncertainty problem," Ryan concluded. "Businesses aren't hiring because of all this government uncertainty. We want to address that."

This video is from ABC's Good Morning America, broadcast Sept. 23, 2010.