In my earlier post, I catalogued some quotes from high Bush Administration officials asserting the Laffer claim that a cut in US tax rates stimulates income so much that the Treasury ends up taking in more revenue than before. I didn’t then quote in detail the extensive statements made by the Director of Office of Management and Budget, Joshua Bolten, in July 2005.
Director Bolton’s statements are of particular interest for several reasons. First, by 2005 it had become obvious to any objective observer that (1) the record budget surplus inherited by the Bush Administration had been quickly converted into a record budget deficit, and that (2) the aggressive Bush tax cuts were a major cause of that swing (as was the sharp acceleration in federal spending, both domestic and international, relative to the 1990s). Second, while the utterings of President Bush himself can in general perhaps be dismissed as not to be taken seriously, Bolten was the professional whose job is to be responsible for the integrity of the budget process. (Indeed, he is a higher-quality civil servant than some in the Bush Administration who have been quick to “bolt on” crazy ideological propositions to what should be serious positions.)
Here is what the OMB director had to say about the Laffer proposition:
“And with all those economic gains, we are also seeing more revenues coming into the Federal Treasury. We have arrived at this point largely because of this President’s and this Congress’ pro-growth policies, especially tax relief. Those policies have strengthened the economy, which is now producing better-than-expected revenues.” — Testimony of Joshua B. Bolten, Mid Session Reivioew of the President’s FY 2006 Budget Requst, Committee on the Budget, U.S. House of Representatives, page 1, para. 3.
And lots more:
“The tax cuts proposed by the President and enacted by Congress are not the [budget] problem. They are, and will be, part of the solution…Had Congress not enacted the President’s three tax relief packages, moreover, the economy would be substantially weaker than it is…The most effective way to lower future deficits is to grow the economy. And the President’s tax packages have been well designed to do precisely that.”
“…all economists, I think will agree very strongly that when you reduce taxes, put more money back into the economy, that has a feedback effect in the economy that causes growth and in turn increases receipts. And being able to measure those receipts, to see how much better the government’s fiscal situation is as a result of the tax cuts would be something I’d very much like to include in the numbers….We think we’ve done the right things by making the tax cuts to restore the economy to growth, because what got us into the difficulty deficit situation in the first place is the flagging growth, flagging receipts in the economy. We think the best way back is to restore the economy to growth, and restore receipts that correspond to it…. ”
Q: “…you’ve got a substantial drop in the deficit [forecasted] in 2005…”
A: “…there are other factors involved, and one of them is the ‘03 tax cut.”
– Press Briefing by OMB Director Josh Bolton, The White House, July 15, 2003.