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As the Republican Party waged its all-out attack in 2010 to preserve the Bush tax cuts for the wealthy, the GOP's number two man in the Senate provided the talking point to help sell the $70 billion annual giveaway to America's rich.  "You should never," Arizona's Jon Kyl declared, "have to offset the cost of a deliberate decision to reduce tax rates on Americans."  But with their surrender Friday on the extension of the payroll tax cut for 160 million working Americans, House and Senate Republicans have mercifully , if unwittingly, consigned their "tax cuts increase revenue" myth to the dustbin of history.

That subtraction from the Republican warehouse of bogus talking points on taxes was simply an issue of political survival.  As House Committee on Ways and Means chairman Rep. Dave Camp of Michigan put it, "We got nothing except we got rid of it, so the president can't beat us over the head with it."  But as the Los Angeles Times explained, the experience is causing some Republicans like Georgia Senator Saxby Chambliss to question their party's orthodoxy on taxes:
Yet even on the Bush-era tax breaks, GOP deficit hawks are having second thoughts.

Republican Sen. Saxby Chambliss of Georgia suggested those tax cuts will need to show "real evidence" that extending them will stimulate the economy.

Otherwise, "I would argue very strongly for paying for tax cuts from now on," Chambliss said, who has led bipartisan efforts to reduce the nation's debt. "We're getting ourselves deeper and deeper into a hole, and we're not going to get out of this hole by not paying for expenditures. Period."

That's quite a change of heart for the Georgia Senator.  After all, less than a year ago Saxby Chambliss was not only arguing the opposite, but suggesting that it was not possible for tax cuts to siphon revenue from the United States Treasury:
"When we lower tax rates, we generate more in revenues.  That happened in '86 with the Reagan plan, happened in 2001, following the Bush plan. So we know that's going to happen."
As the record (below) shows, we did not generate more in revenues.  But while Chambliss wasn't telling the truth last year, at least he was in agreement with the rest of his party.

That was the clear message 18 months ago, when Republicans demanded the extension of the Bush tax cuts for upper-income Americans at a ten-year cost of $700 billion. As Jon Kyl (R-AZ) explained in July 2010:

"You do need to offset the cost of increased spending, and that's what Republicans object to. But you should never have to offset [the] cost of a deliberate decision to reduce tax rates on Americans."
Kyl's was just the latest repackaging of President Bush's long ago debunked claim that "you cut taxes and the tax revenues increase." Texas Senator Kay Bailey Hutchison parroted that line, "Every major tax cut we've had in history has created more revenue."  Then House Minority Leader John Boehner agreed, insisting in June 2011 that the Bush tax cuts had nothing to do with the depleted U.S. Treasury, "It's not the marginal tax rates ... that's not what led to the budget deficit. The revenue problem we have today is a result of what happened in the economic collapse some 18 months ago."  Aborted Obama Commerce nominee Judd Gregg (R-NH) soon chimed in, declaring "I tend to think that tax cuts should not have to be offset." For his part, Oklahoma's Tom Coburn argued his math will work in the future if you ignore the past, "Continuing the [Bush] tax cuts isn't a cost, if you added new taxes, new tax cuts, I would agree that's a cost."  For his part, Senate Minority Leader Mitch McConnell rushed to defend Kyl's fuzzy math:
"There's no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject."
That may have been a view universally shared by virtually every Republican, but it happens to be wrong.

As these two charts from 2011 show, measured as either in dollars terms or as a percentage of the economy, the Bush tax cuts precipitated a drop-off in revenue to the U.S. Treasury.   As a share of American GDP, tax revenues peaked in 2000; that is, before the Bush tax cuts of 2001 and 2003.  Last year, the CBO confirmed that the total federal tax burden hit its lowest level since 1950.  Despite President Bush's bogus claim that "You cut taxes and the tax revenues increase," Uncle Sam's cash flow from individual income taxes did not return to its pre-dot com bust level until 2006.

George Costanza notwithstanding, just because Republicans believe it doesn't mean it's not a lie.  Leave aside for the moment that the Bush tax cuts accounted for half of the deficits during his tenure, and if made permanent, over the next decade would cost the U.S. Treasury more than Iraq, Afghanistan, the recession, TARP and the stimulus - combined.

The Bush tax cuts not only didn't pay for themselves, they weren't paid for anywhere else in the federal budget.  They were and continue to be the biggest drain on the U.S. Treasury, whose tax collections as percentage of the American economy hit a 60-year low in 2010.  As the Washington Post summed up the CBO's conclusions regarding the causes of the nation's mounting debt last year, "The biggest culprit, by far, has been an erosion of tax revenue triggered largely by two recessions and multiple rounds of tax cuts."  A July analysis by the New York Times echoed that finding:

With President Obama and Republican leaders calling for cutting the budget by trillions over the next 10 years, it is worth asking how we got here -- from healthy surpluses at the end of the Clinton era, and the promise of future surpluses, to nine straight years of deficits, including the $1.3 trillion shortfall in 2010. The answer is largely the Bush-era tax cuts, war spending in Iraq and Afghanistan, and recessions.

But as Ezra Klein explained in the Washington Post, the revealing Times chart doesn't tell the full story of the impact of Bush-era policies on future debt facing Barack Obama:

What's also important, but not evident, on this chart is that Obama's major expenses were temporary -- the stimulus is over now -- while Bush's were, effectively, recurring. The Bush tax cuts didn't just lower revenue for 10 years. It's clear now that they lowered it indefinitely, which means this chart is understating their true cost. Similarly, the Medicare drug benefit is costing money on perpetuity, not just for two or three years. And Boehner, Ryan and others voted for these laws and, in some cases, helped to craft and pass them.
But that was then and this is now.  After getting bludgeoned by the President, the economics profession and the public alike, Republicans finally ended their stonewalling of the payroll tax cut extension and other of Obama's measures aimed at keeping the momentum of the U.S. recovery.  In so doing, Republicans also deprived themselves of their cherished lie that tax cuts never have to be offset.

But that's OK.  On the three year anniversary of the Obama stimulus program that the facts and the overwhelming consensus of economists - including John McCain's 2008 brain trust - believe saved America from "Great Depression 2.0,"Republicans are returning to another tried if untrue sound bite.  As Speaker John Boehner claimed as he announced the GOP's surrender on the payroll tax bill:

"The president's policies are not helping our economy.  Matter of fact, a lot of people would argue those policies are actually making it worse."
Of course, Boehner's "people" are his Republican colleagues and their conservative water-carriers.  But their endless repetition of the sound bite that President Obama "made the economy worse," just like their old chorus that tax cuts pay for themselves and so never need to be offset, doesn't make the claim any more true.

(For more background, see "10 Epic Failures of the Bush Tax Cuts" and "10 Republican Lies about the Bush Tax Cuts.")

* Crossposted at Perrspectives *

Originally posted to Jon Perr on Fri Feb 17, 2012 at 11:28 AM PST.

Also republished by Community Spotlight.

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