E.J. Dionne: 'Tax Cuts Add to the Deficit No Less Than Spending Increases Do'

January 3rd, 2011 9:51 AM

What kind of an idiot must you be to believe that tax cuts have an equal dollar for dollar negative impact on a government budget as spending increases do?

The most obvious answer given the charge of this website is a liberal media member, and the Washington Post's E.J. Dionne nicely proved this point with his column Monday:

As for the House Republicans' plan to gut pay-as-you-go budget rules by not requiring offsets for tax cuts, it's ridiculous by the ordinary rules of mathematics. Tax cuts add to the deficit no less than spending increases do.

Really, E.J.? For that to be true, wouldn't absolutely no positive economic impact have to come from such a tax cut?

If tax cuts have no stimulative value whatsoever - zero, zip, zilch! - why did President Obama and former President Bill Clinton tell the nation less than a month ago it would be castrophic for the economy to allow the Bush tax cuts to expire?

I guess E.J. forgot that.

Economists on the left and the right have debated for decades what the net revenue result is from tax cuts.

Conservative analysts cite the explosion in tax receipts during the Reagan era as evidence tax cuts stimulate the economy to such an extent that federal coffers grow at a much faster rate than if rates had been left unchanged.

Income tax receipts also grew much faster in the latter part of the '90s following the Gingrich tax cuts than they did after Clinton's tax hikes in the early part of that decade. The same was true in the '00s when receipts exploded nicely after the Bush cuts were enacted up until the financial crisis in 2008.

Not convinced of this is former Federal Reserve chairman Alan Greenspan who has said on numerous occasions that tax cuts have some net negative impact to the budget, although to the best of my knowledge he's never quantified the associated percentage reduction.

However, for tax cuts to result in a dollar for dollar decline in receipts necessitates absolutely zero positive stimulation to the economy as a result of said cuts, and there is no recent history of such a thing occurring.

But what should we expect from a so-called journalist that on the one hand writes, "Like it or not, Republicans won the House in last year's election" while moments later quoting the perilously liberal historian Gordon Wood to bash the Tea Party:

From its inception, the Tea Party movement has treated the nation's great founding document not as the collection of shrewd political compromises that it is but as the equivalent of sacred scripture.

Yet as Gordon Wood, the widely admired historian of the Revolutionary era has noted, we "can recognize the extraordinary character of the Founding Fathers while also knowing that those 18th-century political leaders were not outside history. . . . They were as enmeshed in historical circumstances as we are, they had no special divine insight into politics, and their thinking was certainly not free of passion, ignorance, and foolishness."

An examination of the Constitution that views it as something other than the books of Genesis or Leviticus would be good for the country.

For those unfamiliar with Wood, the conservative think tank the Claremont Institute's Steven Hayward depicted him quite accurately in 2007:

Gordon Wood is the favorite historian of America's liberal establishment. His essays appear regularly in the New York Review of Books and the New Republic, and liberalism's leading intellectuals—from Michael Sandel to Morton Horwitz to Bruce Ackerman to Cass Sunstein—regularly cite him with approbation. What virtues do they see in his work? In Wood's books, particularly his Creation of the American Republic, 1776-1787, they see a hammer with which to bash American individualism and capitalism, and to support an ever-growing administrative state.

Any surprise that Dionne finds Wood's views important and has no clue of the stimulative nature of tax cuts?