One other response to Dave’s post on the merits of tax cuts versus tax increases. I don’t dispute for a minute that a lot of Bush-era conservative commentary on tax cuts degenerated into an absurd cariacture of supply-side theory (you had people arguing simultaneously that the same tax cuts would increase revenues and starve the beast). This isn’t necessarily any crazier than the belief that you can cut taxes for 95 percent of the American people, including people who don’t pay any taxes, and magically finance a vast expansion of social welfare programs simply by nudging the other 5 percent or less into a 39.6 percent tax bracket rather than a 35 percent bracket. But neither vision is especially realistic.
That said, the following strikes me as an oversimplification: “They [Clinton-era liberals] thought they proved in the 1990s that these were fair tax rates under which the economy could grow wildly, and that Bush proved in the 2000s that lower marginal tax rates for the wealthy didn’t spur real economic growth.” Raising taxes two years after the 1990-91 recession was over isn’t necessarily going to have the same effect as raising taxes as the economy could conceivably be teetering on the brink of a double-dip recession. All the Clinton versus Bush experiment really proves is that a 39.6 percent tax rate isn’t enough to stop the dot-com boom and a 35 percent tax rate won’t avert a mortgage criss or financial meltdown.
The case for the awesomeness of the Clinton tax increases becomes even weaker when you note that the the economy didn’t really begin to “grow wildly” until 1997, after there had been cuts in the capital gains tax similar to the 2003 Bush tax cuts. That’s not to say there were nothing wrong with Bush’s economic stewardship versus Clinton’s — the policies that really brought us to the doldrums were much more bipartisan than either the Clinton tax hikes or the Bush tax cuts. But the overall economic climate was different during both presidencies.
By the way, here’s an example of how Ronald Reagan’s presidency was transformative in a way that his successors’ terms have not been: for all the ridicule of curves being drawn on cocktail napkins to justify trickle-down voodoo, nobody wants to go back to the pre-Reagan tax rates. I wonder why?