The recession and the slow economic recovery of the early 1990s were the consequences of Congress and two successive administrations abandoning the sound economic program, inaugurating a regulatory jihad, going on a spending binge and raising taxes twice in five years. It was only after Republicans regained congressional control in 1994, put a brake on spending growth and convinced President Clinton to cut tax rates, specifically the capital gains tax rate, that the economy took off again, and growth-driven revenues turned deficits into surpluses.
Dorgan gets it. He explained how he learned from his grandfather as a boy the harmful consequences of excessively high tax rates: "My grandfather, a great boxing fan, explained to me when I was a little boy that Rocky Marciano fights only once a year because Al Wyle, his manager, says that if he fights a second time - tax rates were 90 percent - he only gets 10 cents of every dollar, the government gets 90 cents. So I'm not unsympathetic, Mr. Kemp, to your proposition."
Exactly! That's why JFK said it's a paradoxical truth that high tax rates cause low tax revenues and the best way to raise revenues is to lower tax rates.
As to the national debt, not only is it not a problem currently, it will continue to fall as a share of GDP even after two back-to-back tax cuts and even in the face of temporary deficits caused by the recession and several years of slow economic growth. The Congressional Budget Office has not yet officially projected the effects of this year's tax reforms on revenues and debt, but CBO did make estimates of the effects of Bush's original tax-cut proposal, which was about twice as large. Assuming the president's original tax-cut proposal was enacted into law, CBO projected that GDP would equal $18 trillion in 2013 while the national debt would decline almost 13 percent, from 37 percent of GDP in 2004 to 32.2 percent in 2013.
To appreciate just how small the so-called revenue loss from this year's tax cuts is - even when calculated under the unrealistic, static assumption that lower tax rates won't increase economic growth - compare the 10-year $800 billion "revenue loss" the tax cuts are expected to produce if they are made permanent to the $146 trillion in GDP that CBO projects the economy will generate during the next decade. It amounts to a minuscule 0.5 percent.
In 1962, Kennedy led and Republicans begrudgingly followed. Today, Bush is leading, and Democrats are reluctantly trailing in his wake. Until Democrats reject the politics of class envy and replace it with the politics of economic growth and individual opportunity, they will continue to lose elections.