Bush Tax Cuts Preceded Slowest US Growth Since WWII

In a follow-up to his piece on the importance of economic growth to deficit reduction, the NY Times' David Leonhardt looks at the effect of the Bush tax cuts, and concludes "Every available piece of evidence seems to suggest that the Bush tax cuts did little to lift growth."

Those tax cuts passed in 2001 amid big promises about what they would do for the economy. What followed? The decade with the slowest average annual growth since World War II. Amazingly, that statement is true even if you forget about the Great Recession and simply look at 2001-7.

Is there good evidence the tax cuts persuaded more people to join the work force (because they would be able to keep more of their income)? Not really. The labor-force participation rate fell in the years after 2001 and has never again approached its record in the year 2000.

Is there evidence that the tax cuts led to a lot of entrepreneurship and innovation? Again, no. The rate at which start-up businesses created jobs fell during the past decade.

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In an interesting counterpoint to Leonhardt's analysis of the Bush tax cuts' failure to promote economic growth, the Washington Post's David Ingatius observes "It's a strange populism that denounces Wall Street in one breath and, in the next, shouts down tax changes that would treat the financiers' incomes like those of everyday folks."

Ignatius identifies lobbyists for the private-equity industry and Karl Rove's American Crossroads, funded by little guys like Donald Trump, as leading opposition to recommendations of the Joint Committee on Taxation to close loopholes that benefit only the very most wealthy investors and their fund managers.

Read the Why is Congress protecting a tax code that benefits the rich?