McConnell: Bush Tax Cuts Paid for Themselves
A few days ago, Sen. Jon Kyl (R-Ariz.) termed unemployment benefits — a federal insurance system paid for by employers — a “necessary evil” and said that tax cuts should not need to be offset, but benefits extensions should.
Today, speaking with Talking Points Memo’s Brian Beutler, Sen. Mitch McConnell (R-Ky.) doubled down. “That’s been the majority Republican view for some time,” he said. “That there’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject.”
This is factually incorrect, and Democrats should be all over this today. Tax cuts do not pay for themselves. Every dollar of tax cuts by making the Bush cuts permanent stimulates an additional 30 cents or so of economic activity. Unemployment insurance does not pay for itself, but it comes much closer. Every dollar of unemployment benefits stimulates around $1.60 of economic activity. Moreover, no economist on earth would say that tax cuts do not need to be offset, but spending increases do; in terms of the budgetary bottom line, there is no difference.
Here is a chart from Karl Smith, a professor of economics and government at the University of North Carolina, Chapel Hill, at the blog Modeled Behavior, showing the impact of the $1 trillion Bush tax cuts: