In the early hours of May 23, the House and Senate both approved H.R. 2, a bill that reduces tax rates on wages, dividends and capital gains, among other things. The following day, before the legislation had even been signed into law, The New York Times pronounced it a failure. The front page of its business section carried this headline: "No Big Rush to Stocks After Cuts in Two Taxes."
This is typical of the way liberals treat conservative initiatives. Once they know that they cannot be stopped, they establish a measure of success for the initiative that is impossible to achieve. Liberals have been doing this for more than 20 years with the Reagan tax cut, falsely claiming that it was not supposed to lose any revenue because of its stimulative effect on the economy. By setting up such a ridiculous standard of success, they can thereby proclaim the Reagan tax cut to have been a failure due to the deficits of the 1980s.
It doesn't matter that no responsible economist, inside or outside the Reagan administration, ever said that the tax cut would instantaneously pay for itself. Nor does it matter that the economy did grow sharply after passage of the tax cut, even as inflation fell. All the liberal warnings about how tax cuts would be dangerously inflationary went right down the memory hole. Because deficits went up, the Reagan tax cut failed in the liberal worldview.
Now, liberals are trying to do the same thing with the Bush tax cut, implicitly claiming that it would lead to an immediate increase in the stock market the moment it passed Congress. Never mind that no supporter of the tax cut ever said this would happen, or that the bill had not even been signed into law yet, or that key details of the legislation were not even known on May 23. All that mattered was that stocks didn't go up the day the bill passed, and therefore it was a failure.
On Tuesday, May 27, the market reopened after Memorial Day and immediately jumped 180 points. So I carefully searched The New York Times the following day to see if the tax bill got any credit. Silly me. The rise was due entirely to some positive economic reports about housing and consumer confidence, according to the Times. No mention of the tax bill.
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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