Today we learn that at least some people in the White House do not buy the Bush Administration's economic and tax cut rhetoric. A problem I am sure will be fixed in the future.
It seems the writers of the Economic Report of the President were unwilling to follow the economic talking points. The Washington Post's Dana Milbank explains:
Bush and his top lieutenants have asserted, as the president did in Chicago on Jan. 7, that the tax cuts will induce economic growth, which "will bring the added benefit of higher revenues for the government." Vice President Cheney said Jan. 30 that the tax cut will "ultimately increase tax revenues for the government." On Feb. 8, press secretary Ari Fleischer said the plan would "pay for itself," an argument Bush also made on Nov. 13 for his first tax cut plan: "the deficit would have been bigger without the tax relief package."
But those assertions are contradicted by a passage in the Economic Report of the President, written by Bush's Council of Economic Advisers and sent to Congress this month. That report said it is not true "that tax cuts pay for themselves with higher output." The passage, discovered on Pages 57 and 58 by Spinsanity, a Web site that debunks political rhetoric, continues: "Although the economy grows in response to tax reductions [because of higher consumption in the short run and improved incentives in the long run], it is unlikely to grow so much that lost tax revenue is completely recovered by the higher level of economic activity."
D'oh!
But that is not all. Milbank continues on another subject dear to me, the deficit:
Finally, Bush's top deputies have argued that there is no relationship between increased deficits and higher interest rates. Speaking to the U.S. Chamber of Commerce on Jan. 10, Cheney said some people "argue that increased deficits necessarily lead to increased interest rates, which in turn slows economic growth. But the argument has one slight flaw: The evidence of recent years simply doesn't support it."
Likewise, Mitchell E. Daniels Jr., White House budget chief, said Feb. 3, "I do not see that correlation" between deficits and interest rates. "There is no evidence, zero," he said, before qualifying that to say there is a "historically very moderate" effect, but "one would not expect an impact" in the current situation.
Even R. Glenn Hubbard, chairman of Bush's Council of Economic Advisers, dismissed the correlation was "nonsense" and "Rubinomics," a term that plays on the name of President Bill Clinton's treasury secretary.
But the report released this month by Hubbard's council said there was indeed a correlation. "A conservative rule of thumb . . . is that interest rates rise by about 3 basis points for every additional $200 billion in government debt." The council called it a "modest" effect that would not undermine Bush's plan, but a relationship nonetheless.
J. Bradford DeLong, a former Clinton economist, noted that Hubbard, in his academic writings, argued that in "the late 1990s, an emerging federal budget surplus put downward pressure on interest rates" and that "the large increase in the federal budget in the early 1980s" created "short-run pressures for higher output and interest rates."
So, is the Bush Administration economic and tax cut plan about helping the economy, or is it a payoff to supporters and the continuance of the misguided supply-side ideological march?
More important: will Congressional Democrats, and moderate Republicans, now stand up to stop it?