Pawlenty: Bush Tax Cuts "Didn't Fully Serve Their Intended Purposes"

Reporting on Politics and Policy.
June 13 2011 11:02 AM

Pawlenty: Bush Tax Cuts "Didn't Fully Serve Their Intended Purposes"

DERRY, N.H. -- Addressing a packed, boisterous room at Halligan Tavern here, accompanied by half a dozen state legislators (not all had endorsed him), Tim Pawlenty made a mostly economics, competence-based case against the Obama administration. Keynesian spending didn't work; "it's time to try something new."

That made me want to ask Pawlenty about his economic plan. Pawlenty's set a goal of 5 percent GDP growth achieved with a combination of regulation rollback and deep tax cuts -- cutting the top marginal rate to 25 percent, dramatically cutting corporate taxes. This, argues Pawlenty, will grow the economy; the growth will cut the debt. But our previous experience with supply side tax cuts, in 1981 and 2001/2003, has not been marked by debt reduction. I focused on the Bush tax cuts because the first round of them reached their 10 year anniversary this month. 

David Weigel David Weigel

David Weigel is a reporter for Bloomberg Politics


"After the Bush tax cuts we got slightly less revenue, we got a larger debt," I asked. "You're talking about tax cuts as part of a larger plan that will grow the economy, reduce the deficit over the long term. Why would that work when the Bush tax cuts didn't?"

"Keep in mind," said Pawlenty, "our plan does not just cut taxes. It cuts spending. Big time. So as people look back to the historical examples, there's been other chapters where tax cuts have been enacted, and almost always they raise revenues if you just isolate the effect of the tax cuts. But I think they didn't fully serve their intended purposes, because at the same time, past Congresses and administrations also raised spending. That's not what we're proposing. We're not proposing to cut taxes and raise spending. We're proposing to cut taxes and cut spending, and if you do that we're going to grow jobs by shrinking government. We're going to grow the private sector by shrinking government."

"On the revenue side," I said, "they [the Bush tax cuts] generated less revenue than the previous tax rates did. Why would your tax cuts generate more?"

"When Ronald Reagan cut taxes in a significant way," said Pawlenty, "revenues actually increased by almost 100 percent during his eight years as president. So this idea that significant, big tax cuts necessarily result in lower revenues -- history does not [bear] that out."

Both parties have a problem here, although the Democrats' problem is a lot more immediate. The recent experience of both parties has been: Economic policies that didn't really work. To find one that did, Democrats head back to the 1990s; Republicans head back to Reagan.

David Weigel is a reporter for Bloomberg Politics



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