Bruce Bartlett

Even if Reagan had tried to convince people that his tax cut would not lose revenue, it is hardly plausible to believe that a Democratic Congress and a hostile media would have allowed him to get away with it. One may believe that the 1981 tax cut was bad policy, but the idea that anyone was tricked or deluded about its revenue effect is simply absurd.

The same is true today. Notwithstanding the statements quoted earlier, the Bush administration has always said that its tax plan will lose large revenues. The Treasury Department says it will reduce revenues by $1.5 trillion between 2003 and 2013. Congress's Joint Committee on Taxation has made an independent estimate that is almost identical.

However, the Council of Economic Advisers has said that the tax plan will raise economic growth and reduce unemployment. It estimates that a larger economy and increased employment will offset about half of the estimated revenue loss by 2007. The gross revenue loss is estimated at $359 billion, but the net loss will only be $166 billion, according to a CEA study. But in its 2003 Economic Report, the CEA goes on to caution that higher growth from any significant tax cut is never likely to be so great "that lost tax revenue is completely recovered by the higher level of economic activity."

Despite these facts, Bush administration critics, such as the Center on Budget and Policy Priorities and Spinsanity (a website), continue to claim that it is somehow deceiving the American people about the revenue effect of its tax plan. The plain and simple truth is that it will lose large revenues, just not as much as standard budget estimates predict because they assume no change in economic growth. But in a $10 trillion economy, even a very small increase in growth will expand the tax base and offset some of the projected revenue loss.

Contrary to popular belief, this is not a controversial proposition. As then-Minority Leader Dick Gephardt, D-Mo., said on "Meet the Press" last year (Jan. 27), "The purpose of tax cuts ... is to get the economy to grow. If you can get the economy to grow, you will start having more money coming into the government."

Bruce Bartlett

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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