Another Liberal Lie Exposed: Tax Cuts Don’t Create Jobs!

by Carl Reed

When House Speaker John Boehner appeared on NBC’s Today Show he made a comment which seems to have the liberal community all atwitter. When asked by Matt Lauer, “So why are the Bush era tax cuts creating jobs,” Boehner replied the tax cuts “created 8 million jobs over the first ten years of their existence.”  What seems to have gotten liberal drawers in a bunch is the time frame of ten years.  Although, the ten year time frame is questionable, that is a forest for the trees argument.  They are missing the salient point that those tax cuts, as have almost all other tax cuts, created jobs.

Bush Tax Cuts

The 2003 Bush tax cuts lowered income, capital gains and dividend tax rates.  According to data from the U.S. Commerce Department, Bureau of Economic Analysis the economy lost 267,000 jobs in the six quarters before the cuts.  In the next six quarters the economy added 307,000 jobs, followed by 5 million jobs in the next seven quarters.

According to data from the Department of Labor, Bureau of Labor Statistics, after the Bush tax cuts, there was a steady decline of unemployment from a high of 6.3% in June of 2003 to a low of 4.4% in May of 2007.

Clinton Tax Cuts

The Bush tax cuts aren’t unique.  Liberals love to bring up the Clinton tax increases to support their argument for tax increases.  However, a closer look at economic performance during the Clinton years tells a whole different story.  The truth is that the real boom during the Clinton era didn’t happen until after 1997, the year Clinton cut tax rates.  From 1993 to 1996 the economy was recovering from a recession.  We would have expected strong growth from this period naturally.  During that period real economic growth averaged 3.2 percent and 11.2 million jobs were added.  During the period 1997 to 2000, after the 1997 tax cuts, economic growth averaged 4.2 percent and 11.5 million jobs were added.  According to economist, J.D. Foster, Ph.D.

The first period, from 1993 to 1996, began with a significant tax increase as the economy was accelerating out of recession.  The second period, from 1997 to 2000, began with a modest tax cut as the economy should have settled into a normal growth period.  The economy was decidedly stronger following the tax cut than it was following  the tax increase.

In summary, coming out of a recession into a period when the economy should grow relatively rapidly, President Clinton signed a major tax increase.  The average growth rate over his first term was a solid 3.2 percent.  In 1997, in a time when the expansion was well along and economic growth should have slowed, Congress passed a modest net tax cut.  The economy grew by a full percentage point-per-year faster over his second term than over Clinton’s first term.

Reagan Tax Cuts

The Obama administration is fond of telling us what they inherited from the Bush administration.  President Reagan also inherited a moribund economy from his predecessor.  When Reagan took office, the economy was bogged down by high inflation, high interest rates and high unemployment.  In August of 1981, President Reagan signed into law the Economic Recovery Tax Act (ERTA) which cut marginal earned income tax rates across the board over a three year period.  The highest marginal tax rate on unearned income dropped to 50% from 70% and the tax rate on capital gains also feel immediately from 28% to 20%.  The unemployment rate, which peaked at 9.7% in 1982, began a steady decline, reaching 7.0% by 1986 and 5.3% by the end of Reagan’s second term in office, January 1989.

Liberals love to try and counter the efficacy of the Reagan tax cuts by pointing out that he raised taxes as well.  Again, you have to look behind the numbers in order to get the full story.  Doing so reveals that Reagan’s tax cuts outstripped the tax increases by over 50%.  Over Reagan’s eight year term his tax cuts totaled 11.99 percent of gross revenues; the tax increases were 7.35 percent of gross revenues, for a net tax cut of 4.64% of gross revenues.

There is an even greater context to the Reagan tax cuts, especially as it relates to our current situation.  The majority of the Reagan tax cuts came in his first term, when they were needed the most.  As a result the economy boomed and the cuts led to one of the greatest economic expansions in history.  There is also another bit of context that liberals conveniently fail to address.  Reagan always faced Democrat legislative majorities and eventually he had to deal.  The Democrats, led by House Speaker Tip O’Neill, promised, in exchange for some tax hikes, to cut spending.  The Democrat Congress naturally reneged on the deal.  Is it any wonder that the current House of Representatives is skeptical of promises made by President Obama to cut spending in the out years?

Kennedy Tax Cuts

Democrats haven’t always believed that tax cuts are bad for the economy.  Consider this quote from President Kennedy:

Tax reduction thus sets off a process which can bring gains for everyone, gains won by marshalling resources that would otherwise stand idle — workers without jobs and farm and factory capacity without markets.  Yet many taxpayers seemed prepare to deny the nation of the fruits of tax reduction because they question the financial soundness of reducing taxes when the federal budget is already in deficit.  Let me make clear why, in today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarged the federal deficit — why reducing taxes is the best way open to us to increase revenues.

The tax rate reductions he proposed were passed into law after he was assassinated so he never got to see their impact.  The Kennedy cuts reduced the top marginal income tax rates from 91 percent to 70 percent.  Lower rates were reduced as well.  The economy responded dramatically.  Unemployment dropped from a four year pre-tax cut average of 5.8% to a four year post-tax cut average of 3.9%.  GDP increased from a four year pre-tax cut average of 4.6% to a four year post-tax cut average of 5.1%.

Truman Era Tax Cuts

President Truman had to be dragged kicking and screaming to the power of tax cuts.  Republicans, after having taken control of Congress for the first time in sixty years twice passed a tax cuts only to see Truman veto them with the claim that they favored the wealthy.  Sounds familiar, doesn’t it.  In 1948, Republicans were successful in over-riding Truman’s third veto of tax cut legislation they had passed.  Rather than sliding back into recession as many had feared, the economy soared toward full employment.  According to historian Burt Fulsom:

Congress reduced taxes.  Income tax rates were cut across the board.  FDR’s top marginal rate, 94% on all income over $200,000, was cut to 86.45%.  The lowest rate was cut to 19% from 23%, and with a change in the amount of income exempt from taxation, an estimated 12 million Americans were eliminated from the tax rolls entirely.

Corporate tax rates were trimmed and FDR’s “excess profits” tax was repealed, which meant that top marginal tax rates effectively went to 38% from 90% after 1945… By the late 1940s, a revived economy was generating more annual federal revenue than the U.S. had during the war years, when taxes were higher.  Price controls from the war were also eliminated by the end of 1946.  The U.S. began running budget surpluses.

According to data from the Bureau of Labor Statistics, unemployment stood at 3.4% in January of 1948.  In December of 1952, unemployment stood at 2.7%.

Harding/Coolidge Tax Cuts

In 1918, thanks in part to World War I, tax rates had peaked at 77%.  Through a series of tax rate reductions, the Harding-Coolidge tax cuts dropped the top personal marginal tax rate to 25% in 1925.  The economy responded dramatically with federal real revenue growth rising from a pre-tax cut four year average of negative 9.2% to a post-tax cut four year average of positive 0.1%.  Real GDP growth increased from a pre-cut four year average of 2.0% to a post-cut four year average of 3.4% and unemployment decreased from a pre-cut four year average of 6.5% to a post-cut four year average of 3.1%.The historical evidence is incontrovertible; tax cuts help the economy and are especially beneficial during recessionary periods.  With all the available, it is hard to believe Democrats keep propagating the myth that tax increases are the best way to stimulate an economy out of recession.


About sswimp

I am not an "African-American'. I am a proud American, who happens to be of African descent. I am Christian. My personal relationship with Jesus Christ and the Word of God shapes my concepts of what it means to be a conservative. I am Pro Life. Devoted to the principles of free enterprise, limited government,and individual responsibility. I believe in the sanctity of marriage between a man and woman.
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3 Responses to Another Liberal Lie Exposed: Tax Cuts Don’t Create Jobs!

  1. Thank you Stacy for providing this excellent forum for conservatives to share and learn the important principals that have made this great nation strong and free. God bless America and God bless you my friend!

  2. Jeannie says:

    Thank you Stacy! I am so glad that I found you. Keep this going! We need truth and a sound mind. God bless you!

  3. contact says:

    Wow, this paragraph is pleasant, my sister is analyzing such things, so I am going to tell her.

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