This week marks the third anniversary of the Bush tax cuts, which reduced the income tax rates as well as the tax rates on capital gains and dividends. Though the left and most of the media issued dire warnings about the impact of these tax cuts, the actual results have been spectacular. As the chart shows, they created one of the fastest three-year growth spurts in modern U.S. history.
In the first quarter of this year, the U.S. was generating economic growth 5.3% faster than the previous quarter. We are producing over $13 trillion per year, which is nominally nearly $3 trillion more than we were producing in the year before the Bush tax cuts. Even adjusted for inflation, that’s the second biggest increase in modern U.S. history. The only larger increase was during the brief bubble of the late 1990s.
The supply-side experiment of the last three years has not run its course, but any honest analysis of the economic impact of the Bush tax cuts must take into account the tremendous growth those tax cuts have already spurred.