What Others Say:  ‘Return of the rosy scenario’

02/14/2006

Star Tribune Editorial

The Bush administration is famous for squelching unwelcome advice from government experts, a habit that explains why Vice President Dick Cheney insisted that Iraq had weapons of mass destruction and why the new Medicare drug benefit is costing taxpayers almost twice what the president predicted.

Now the White House is applying the same principle to tax theory. The Washington Post reported Saturday that the administration plans to establish a “Division on Dynamic Analysis” at the U.S. Treasury Department to measure the economic effect of tax cuts—and, apparently, to prove that tax cuts pay for themselves.

“The evidence is in,” Cheney told an audience last week. “Sensible tax cuts increase economic growth and add to the federal treasury.”

Oh really? After Congress passed President Bush’s first tax cut in 2001, federal revenues dropped for three years in a row—the first time that has happened since the 1920s. After Congress passed the second big Bush tax cut, in 2003, federal revenues came in below forecast in two of the three subsequent years and federal deficits came in higher in all three years. If tax cuts are so good for the federal treasury, why has this administration run five budget deficits in five years?

It’s no mystery why the White House wants to order up its own research on tax cuts. The president has asked Congress to extend temporary tax cuts enacted in 2003 that are scheduled to expire between 2006 and 2010. But the Congressional Budget Office, a nonpartisan forecasting agency, said last month that if the tax cuts become permanent the president cannot fulfill his promise to cut the federal deficit in half by 2009.

Congressional Republicans are boasting this month that tax cuts work—because the 2005 deficit came in below forecast. But that’s only because the White House high-balled the deficit last winter in a forecast that no one else believed. They say the president is on track to cutting the deficit in half by 2009. But that’s only because the White House includes revenue from Social Security, which is now running huge surpluses.

There is, as the vice president suggested, broad agreement among economists that tax cuts stimulate economic growth. There is absolutely no consensus that tax cuts pay for themselves. But then this administration has never let expert opinion clutter up its plans for the nation.