One of the favorite liberal myths of the 1980s is that Ronald Reagan and his advisers played an elaborate trick on the American people. They got a huge tax cut passed in 1981 by convincing Congress, the press and the American people that it would lose no revenue. Supposedly, there would be so much additional work, saving and investment from the lower tax rates that the tax cut would pay for itself, resulting in no increase in the budget deficit.
The large budget deficits of the 1980s, therefore, are sufficient proof that anything to do with "supply-side economics" is per se hokum, mumbo jumbo and balderdash. That is why liberals are working overtime to paint George W. Bush's tax plan as a replay of Reaganomics.
Interestingly, the evidence that the Bush administration is promoting its tax plan as supply-side economics is much stronger than that for President Reagan. In a Jan. 7 speech, Bush said his proposal would increase growth enough to raise federal revenue: "That growth will bring the added benefit of higher revenues for the government-revenues that will keep tax rates low, while fulfilling key obligations and protecting programs such as Medicare and Social Security."
A few days later, Vice President Cheney echoed this view in a speech before the U.S. Chamber of Commerce. Said Cheney, "The president's growth package will reduce the tax burden on the American people by $98 billion this year, $670 billion over the next 10 years. But the actual impact on the deficit will be considerably smaller than the static projections, because the president's package will generate new growth, it will expand the tax base, and thus increase tax revenue to the federal government ultimately."
Lastly, White House Press Secretary Ari Fleischer had this to say on Jan. 8: "The entire package the president does believe will lead to growth, which will over time grow the economy, create additional revenues for the federal government and pay for itself."
These statements are vastly stronger than anything anyone in the Reagan administration had to say on the subject. In fact, no one in the Reagan administration ever said that the 1981 tax cut would pay for itself. This is just a canard that is assumed to be true because it has been repeated so often. Every official statement ever made by Reagan or any of his staff made clear that the tax cut would lose large revenues, and administration budget documents projected large revenue losses that were almost identical to Congressional Budget Office estimates.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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