In some sense, the Republicans have lost the narrative battle over the Bush “tax cuts.” Every administration sets tax rates: Carter raised, Reagan cut, Bush 41 raised, Clinton raised, and Bush 43 cut. “Cuts” is simply an arbitrary label of some part of the cycle apart from the whole. These are not proposals to cut taxes, simply to continue the existing Bush rates, which are now a decade old.
Second, the “millionaires and billionaires” label that has been attached to the 2 percent that were targeted to have their taxes raised is misleading, since 95 percent of these “rich” do not make a million dollars a year; the vast majority made between $250,000 and $500,000. Somehow, the guy who runs a restaurant or has a successful dental practice, often with great risks and responsibilities, and makes $300,000 becomes a greedy “millionaire and billionaire,” while such real billionaires as Warren Buffett and Bill Gates become models of generosity for wanting higher taxes.
Third, the relationship between cuts and spending was not communicated well enough. The country is in near-hysteria over whether we raise taxes on the top 2 percent to 39.5 percent, yet seems indifferent to the fact that over the last decade we doubled the budget. The Republican Congress between 2001 and 2006 was as profligate as any Democratic one. By 2004, despite the aftermath of the 2001 recession and the trillion-dollar hit from 9/11, federal income-tax rates were lowered and revenue soared — but not enough to make up for the jump in spending (thanks in part to such programs as No Child Left Behind, prescription-drug benefits, and the farm and highway bills). Had we simply kept federal spending at the rate of inflation, despite wars and the 9/11 aftermath, Bush would have had near-balanced budgets and the utility of across-the-board tax cuts would now be unquestioned.
In this regard, Clinton’s reference to tax hikes that balanced the budget is half-correct: The Clinton administration and its Republican Congress proved to be the most tight-fisted in memory, and by freezing spending, they ensured eventual budget surpluses. But if we double the budget within a decade from $1.9 trillion to $3.8, then the old arguments over whether reasonable tax cuts lead to greater revenue or drain the treasury become academic.