“You equate the idea of lowering marginal tax rates with less revenue for the federal government,” Boehner cautioned. “We've seen over the last 30 years that lower marginal tax rates have led to a growing economy, more employment, and more people paying taxes. And if you look at the revenue growth over those 30 years, you've got a prime example of what we've been talking about.”
Michael Ettlinger and John Irons debunked this nonsense about a year and a half ago. I’d like to simply pick up on this statement:
Economic growth as measured by real U.S. gross domestic product was stronger following the tax increases of 1993 than in the two supply-side eras. Over the seven-year periods after each legislative action, average annual growth was 3.9 percent following 1993, 3.5 percent following 1981, and 2.5 percent following 2001.
Part of the Reagan 3.5% per year average increase had to do with the fact that he inherited an economy below full employment. If you take out the Keynesian effect of returning to full employment – which was mainly from a reversal of tight Federal Reserve policy – average long-term growth during the Reagan years was closer to 3%. For the period from the end of World War II to around 1980 (just before the Reagan tax shift) average growth over this extended period was 3.5% per year. Why? Well in part because national savings as a share of income was higher before the 1981 tax cut than afterwards.
Maybe a reporter should ask the Congressman – how does fiscal irresponsibility and a lower national savings rate lead to more long-term growth rather than less?