I was reading a post over at Doctor Zero talking about an article written by Arthur Laffer regarding the 2003 Bush tax cuts, claiming that they caused government revenue to rise, not fall. I was suspicious. Everyone knows that the tax cuts were a disaster, that they imploded the federal budget and caused massive debt!
I was about to post a comment to this effect when I realized that I didn’t actually have any evidence to back up my claim. So I decided to engage in one of my favorite activities: gathering some data and making a graph.
Now, when most people talk about the “Bush tax cuts” they’re typically talking about the 2003 law, JGTRRA, which immediately lowered tax rates. Bush also passed a tax cut in 2001 that would have lowered tax rates in 2006, but apparently five years was too long to wait, so 2003’s JGTRRA basically enacted those future cuts immediately. Thus, the cuts were first experienced in 2003 rather than 2006, as originally intended, and that’s why my graph only shows the 2003 law.
Here’s the graph:
Holy cats, it’s true! I’m going to admit that until I compiled this graph, I was a skeptic. I mean, after all, everyone knows that Bush racked up huge deficits, and it’s just so darn counter-intuitive that tax cuts could increase revenue. Yet there it is. The data don’t lie.
Some will surely say that the recession was over by 2003, and that revenues were bound to increase around that time anyway. While this is true, it’s also as true that revenues didn’t fall precipitously as many liberals (including myself, at the time) predicted and believed. One thing is clear: the Bush tax cuts did not cause revenues to fall. The worst you can say is that they caused revenues to rise more slowly then they otherwise would have.
Yet it’s also equally clear from this graph that Bush’s presidency ushered in colossal deficits. So if not the tax cuts, then where did they come from?
The real culprit is just as evident: spending. To what extent the Bush tax cuts increased revenue is debatable, but the degree to which Bush spent money the federal government lacked is not. Bush consistently spent more than the government received in revenue, and he demonstrated no interest whatsoever in belt-tightening when the money dried up like most sensible people do; you can see that the spending curve is constantly positive regardless of revenue.
And let’s not even get started with the titanic gulf between spending and revenues in the 2009 and 2010 budgets. And Obama wonders why people are freaked out about the deficit — just look at this graph!