Why Is The Bush Tax Plan "Just Right?"
April 11, 2001
Although economic and budget circumstances have changed, President Bush's tax plan hasn't, says Bruce Bartlett, nor has it ever been adequately justified.
The Bush tax plan was first devised in 1999 by a group of economists led by Larry Lindsey, a former Harvard University professor, but no one has explained the principles they operated under, the alternatives they considered and rejected, or what role Bush played in the process.
- The economy was growing strongly, budget surplus estimates were much smaller, and Bush was locked in a struggle for the Republican presidential nomination.
- Now the economy is near recession and estimates of the budget surplus are even larger; yet, Bush chose to put forward the same identical plan.
The White House has yet to present a detailed economic analysis explaining why this tax plan is just the one the economy needs right now. By contrast, Ronald Reagan gave Congress a highly detailed explanation for his tax plan.
Bush's failure to build a solid foundation for his tax cut led the Senate to slash it last week. How can the administration now say that $1.2 trillion is too little, when it still hasn't explained where the $1.6 trillion figure came from in the first place?
And how can it argue that its plan is the best one to turn the economy around when it has never said how much growth the tax cut will produce? The $1.6 trillion cost estimate for the tax cut assumes that it will have zero effect on economic growth. But taking into account the growth effects of the tax cuts, Harvard economist Martin Feldstein says the true revenue loss would be about $1.2 trillion, exactly what the Senate has given Bush.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, April 11, 2001.
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