George W. Bush's central plan for selling his 2001 tax cut, both as a candidate and then later as president, was to lie about both its cost and its beneficiaries. Jeb Bush's central premise for his own tax cut proposal seems to be the same.
Here he is talking to CNBC's John Harwood about the impact of his plan on the deficit:
Everybody freaks out about the deficit. And I worry about the structural deficit for sure. But if we grow our economy at a faster rate, the dynamic nature of tax policy will kick in. And so we'll be in the hole around $1.2 trillion over 10 years. And these are moderate growth effects. I'm not using the ones that I believe. I'm more optimistic.
There's never been a time where there hasn't been a dynamic effect of taxation. That's not a risk at all. That's just a simple fact. Take the contrary argument here for a second: If tax policy doesn't matter, why don't we just tax everything?
Bush is referring to an estimate prepared for media consumption by John Cogan, Martin Feldstein, Glenn Hubbard, and Kevin Warsh — four men who are smart economists in good standing but who are also very much partisan Republicans. The right way to think about an estimate they put together is that it represents the outer limit of what a person is willing to claim on behalf of the growth impacts of Bush's tax cut and feel like he can still look at his graduate students with a straight face.
And guess what? The paper doesn't say what Bush says it says.
The paper says that under a conventional static estimate, Bush's tax cuts will cost $3.4 trillion. They get that down to the $1.2 trillion figure Bush cites by assuming that GDP will be 8 percentage points higher in 2025 in the Bush Utopia than it will be under current policies. But, crucially, there are two elements to this Bush Utopia:
- "Employing conservative assumptions, we estimate that the tax reform plan itself will lead to at least five percentage points higher GDP by the end of a decade."
- "The Governor’s regulatory reforms — which will be unveiled separately — will increase GDP by at least an additional three percentage points by 2025."
In other words, 60 percent of the dynamic growth effects Bush is counting on aren't even part of the tax cut at all.
Obviously even if Bush were able to get his basic facts right, the underlying claim about the growth-boosting impact of the tax cuts is disputable. Jeb's brother claimed that the growth-boosting power of his tax cuts would avoid increasing the deficit, and we got eight years of fairly dismal economic performance.