Bruce Barlett on the Tax Cuts

Original “Reaganomics” advocate Bruce Barlett speaks truth to the Republican faithful on the reality of the Bush tax cuts.

Students of philosophy will recognize a logical fallacy usually quoted in Latin: post hoc ergo propter hoc. Basically, it means that just because B follows A, it doesn’t prove A caused B. There may not necessarily be any relationship between the two. Only careful analysis can establish such a relationship.

Unfortunately, much of the debate about President Bush’s tax cuts relies on this logical fallacy. Supporters of the tax cuts point to a healthy economy, as evidenced by recent economic statistics. Since tax cuts preceded the economic expansion, therefore the expansion was caused by the tax cuts. By implication, we would still be wallowing in recession had President Bush not pushed large tax cuts through Congress.

Obviously, this is ridiculous. The economy has suffered from many recessions in the past and always recovered, usually without benefit of any tax cuts.

Of course, revenues always fall off when economic conditions are depressed. Economists call this an “automatic stabilizer” that helps recovery. But this is not the same as legislating tax cuts expressly to stimulate growth.

Anyway, the economic data upon which tax cut supporters rely doesn’t really prove their case. If one compares the recovery from the most recent recession to the last one, it is hard to find any effect of tax cuts at all ..