

Bush's fiscal illusions

8:47 PM, Nov. 17, 2010  |  Comments
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The imaginary but completely delusional: My inner Bush would not regret pushing for the tax cuts. But he would acknowledge - how hard could this be? - that Alan Greenspan was right when he suggested a trigger mechanism to cancel the cuts if the promised surplus failed to materialize.

If only ...


Like the surplus, my quasi-apologetic chapter evaporated in the face of reality. I read "Decision Points" and it turns out that Bush is the Edith Piaf of fiscal policy: He regrets nothing.


Now he tells us? This illusory surplus was the cornerstone on which Bush built his economic policy. "You see, the growing surplus exists because taxes are too high and government is charging more than it needs," Bush said in February 2001.

Far from sounding cautionary notes, the administration asserted its surplus estimates were, if anything, conservative. "If there's going to be a mistake, the likelihood is a mistake will be made on the other side of the scale, that more revenue will come in," Press Secretary Ari Fleischer said in March 2001. You know how that worked out.


How's that? Bush chose to go to war; but, unlike any other wartime president, opted to pay the cost entirely with borrowed funds while pressing for additional tax cuts. He laments that he left behind "a serious long-term fiscal problem" of runaway entitlement spending but blames resistance from both parties in Congress - without acknowledging that he added an expensive and unpaid-for new entitlement, the Medicare prescription drug plan.


This is cleverer than the usual supply-side formulation but still suffers from the tax-cuts-pay-for-themselves fallacy. Bush's own chief economic adviser, Gregory Mankiw, has estimated that over the long run, cuts on investment taxes generate only enough economic growth to make up half of lost revenue.

(Editor's note: Despite making that estimate, Mankiw, one of the nation's most prominent economists, supported and continues to support the Bush tax cuts, which he believes grew jobs, investment and the GDP and were good for the economy long-term.)


Some stewardship.

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