When President Obama unveiled his newest debt reduction plan at The George Washington University, he said once again that George W. Bush’s tax cuts were to blame for the fiscal mess he’s in.
In a speech that sounded more like the kickoff to his reelection campaign than a plan to cut deficit spending, Obama could not resist blaming Bush and the Republicans for all of the economic and fiscal woes that still afflict his presidency, a tactic that worked for him in his 2008 campaign but is growing threadbare and tiresome in his third year in the Oval Office
“We increased spending dramatically for two wars and an expensive prescription drug program—but we didn’t pay for any of this new spending. Instead we made the problem worse with trillions of dollars in unpaid-for tax cuts,” he said.
In “the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years,” Obama said.
Whenever Obama talks about paying for tax cuts, he means, but does not say, raising taxes on someone else. It never occurs to him, nor does he say, that the tax cuts can pay for themselves through increased economic growth and higher employment.
That is exactly what President Bush’s 2003 accelerated tax cuts did in the remaining years of his presidency, a five-year period when the unemployment rate fell well below 6%, and tax revenues rose by hundreds of billions of dollars, cutting the budget deficit in half, according to government revenue and budget deficit statistics.
When Bush was running for office in 2000, the economy was in the midst of a high-tech, dot-com economic boom, until the bubble burst in 2001 and the economy fell into recession. In his first year in office, Bush pushed through an across-the-board income tax cut agenda that would be phased in over several years. But as the recession worsened, unemployment—then at a low 4.7%—rose to 5.8% in 2002 and 6% in 2003.
Federal tax receipts, which had hit a high of $2 trillion in 2000, fell to $1.99 trillion in 2001, to $1.85 trillion in 2002, and then to $1.78 trillion in 2003. Deciding that the economy needed a faster booster shot, Bush and Congress accelerated the Bush tax cuts in 2003, and the nation’s economy responded.
Contrary to Obama’s anti-tax cut, zero-sum ideology, federal tax revenues didn’t fall as a result of Bush’s across-the-board tax rate cuts that affected every income bracket—including a new, lower 10% tax rate for low-income workers—they rose to the following:
—$1.88 trillion in 2004
—$ 2.15 trillion in 2005
—$ 2.4 trillion in 2006
—$ 2.6 trillion in 2007.
In other words, tax revenues rose by more than $800 billion in just four years by cutting tax rates and boosting economic growth that pushed the Dow to a record 14,164 points on Oct. 9, 2007.
Meantime, unemployment fell sharply as the economy expanded, dropping to 5.55 in 2004, 5.1% in 2005, and 4.6% in 2006 and 2007.
This also helped reduce Bush’s soaring budget deficits. They rose substantially during the first half of his presidency as a result of the 9/11 terrorist attacks and the deepening recession, but as federal tax revenues increased, the yearly deficits began to shrink, falling to a modest $161 billion in 2007—a record that Obama can only dream about.
“[I]n 2003-2008, the U.S.’s general (total) government deficit fluctuated between 2% and 5% of GDP,” the Standard & Poors economic analysis firm noted this week in a critical report of the Obama administration’s descent into debt. “[I]t ballooned to more than 11% in 2009 and has yet to recover.”
“This surely is one Bush comparison that the Obama team wishes to bury,” the Wall Street Journal remarked.
To be sure, there are many other factors in measuring Bush’s fiscal record, including levels of spending that could have and should have been cut down to size. The prescription drug program turned out to be a lot less expensive than earlier forecasts, largely because it is run through a private-sector system of drug insurance firms, but this was no time to be dumping another entitlement onto the Medicare program, which is also threatened by insolvency.
In the last year of his presidency, as the economy tipped into a deep recession, tax revenues fell to $2.5 trillion and the jobless rate rose to 5.8%.
Still, Bush began his presidency by cutting tax rates, which helped get our country through some very tough times not of his making, and even Obama renewed them for another two years.
Little more than two years later, Obama’s annual budget is skirting $4 trillion, the deficit is at $1.6 trillion, the national debt is $14.3 trillion and climbing, and the unemployment rate is still nearly 9%.