How did the Reagan tax cuts and Bush tax cuts affect unemployment?

Consider this article by the Cato Institute, a libertarian think tank, which discusses how the Reagan tax cuts affected the unemployment rate.

Excerpt:

In 1980, President Carter and his supporters in the Congress and news media asked, “how can we afford” presidential candidate Ronald Reagan’s proposed tax cuts?

Mr. Reagan’s critics claimed the tax cuts would lead to more inflation and higher interest rates, while Mr. Reagan said tax cuts would lead to more economic growth and higher living standards. What happened? Inflation fell from 12.5 percent in 1980 to 3.9 percent in 1984, interest rates fell, and economic growth went from minus 0.2 percent in 1980 to plus 7.3 percent in 1984, and Mr. Reagan was re-elected in a landslide.

[…]Despite the fact that federal revenues have varied little (as a percentage of GDP) over the last 40 years, there has been an enormous variation in top tax rates. When Ronald Reagan took office, the top individual tax rate was 70 percent and by 1986 it was down to only 28 percent. All Americans received at least a 30 percent tax rate cut; yet federal tax revenues as a percent of GDP were almost unchanged during the Reagan presidency (from 18.9 percent in 1980 to 18.1 percent in 1988).

What did change, however, was the rate of economic growth, which was more than 50 percent higher for the seven years after the Reagan tax cuts compared with the previous seven years. This increase in economic growth, plus some reductions in tax credits and deductions, almost entirely offset the effect of the rate reductions. Rapid economic growth, unlike government spending programs, proved to be the most effective way to reduce unemployment and poverty, and create opportunity for the disadvantaged.

The conservative Heritage Foundation describes the effects of the Bush tax cuts. (H/T The Lonely Conservative)

Excerpt:

President Bush signed the first wave of tax cuts in 2001, cutting rates and providing tax relief for families by, for example, doubling of the child tax credit to $1,000.

At Congress’ insistence, the tax relief was initially phased in over many years, so the economy continued to lose jobs. In 2003, realizing its error, Congress made the earlier tax relief effective immediately. Congress also lowered tax rates on capital gains and dividends to encourage business investment, which had been lagging.

It was the then that the economy turned around. Within months of enactment, job growth shot up, eventually creating 8.1 million jobs through 2007. Tax revenues also increased after the Bush tax cuts, due to economic growth.

In 2003, capital gains tax rates were reduced. Rather than expand by 36% as the Congressional Budget Office projected before the tax cut, capital gains revenues more than doubled to $103 billion.

The CBO incorrectly calculated that the post-March 2003 tax cuts would lower 2006 revenues by $75 billion. Revenues for 2006 came in $47 billion above the pre-tax cut baseline.

Here’s what else happened after the 2003 tax cuts lowered the rates on income, capital gains and dividend taxes:

• GDP grew at an annual rate of just 1.7% in the six quarters before the 2003 tax cuts. In the six quarters following the tax cuts, the growth rate was 4.1%.
• The S&P 500 dropped 18% in the six quarters before the 2003 tax cuts but increased by 32% over the next six quarters.
• The economy lost 267,000 jobs in the six quarters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.

The timing of the lower tax rates coincides almost exactly with the stark acceleration in the economy. Nor was this experience unique. The famous Clinton economic boom began when Congress passed legislation cutting spending and cutting the capital gains tax rate.

Those are the facts. That’s not what you hear in the media, but they are the facts.

Are the rich paying their fair share of taxes?

Do the rich pay their fair share of taxes?

The Hoover Institute at Stanford University tweeted this article.

Excerpt:

The Democrats’ position in the negotiations to raise the debt limit and deal with runaway government debt can be summarized in one mantric phrase: the rich must “pay their fair share” in taxes. White House communications director Dan Pfeiffer, for example, said a day before the Obama’s Sunday summit with Congressmen that any deal requires a “balanced approach that asks the very wealthiest and special interests to pay their fair share.” Earlier this year, Illinois Congressman Jan Schakowsky introduced legislation called the Fairness in Taxation Act, which she justified by saying “It’s time for millionaires and billionaires to pay their fair share.” Clearly, the Democrats think this is a winning formula going into the critical 2012 elections, despite the historically verified fact that raising tax rates on top earners will not over time generate more tax revenues.

Some political Socrates needs to challenge this formula by asking for a definition of “fair.” Clearly, having the top 10% of taxpayers pay 70% of all income taxes––while nearly half of taxpayers pay nothing––isn’t considered “fair” by those who want to increase taxes on high earners. So what would be fair? Having the top 10% pay 80%, or 90%, or 100%? The U.S. already has the most progressive tax system among 24 OECD countries, ahead of socialist heartthrobs like Sweden and Norway, so what more do Democrats want?

It might be a good idea to send this article to your friends, and bookmark it in case you get into a debate.

FL senator Marco Rubio: “We need more taxpayers, not more taxes”

Florida Senator Marco Rubio

If there is anyone I like almost as much as Michele Bachmann, it’s Marco Rubio. And boy, can this guy do an interview.

On the Sean Hannity show: (7 minutes)

And on the Rush Limbaugh radio show: (11 minutes)

He’s William Lane Craig-esque. He just talks about the issues without one hem or haw. Not an uh or an ah to be heard. It’s uncanny. Hmmn. Look at that picture up there. He looks very intense. Do you think he might be some sort of conservative super-android designed by the U.S. Military in a secret base under a mountain in Colorado? I’m not sure.

I actually heard him interviewed on the Hugh Hewitt show on Tuesday night. Hugh played the interview back-to-back in two consecutive hours, and then his producer Duane Patterson posted the full transcript. This one was the best interview of all. Hugh does a great interview, and he was blown away by Marco Rubio.

Excerpt:

HH: Now the President is betting, obviously, that he can turn a conservative message into a toxic one for 2012. Your old colleague from the Florida House, Adam Hasner, is running for Senate down there, a lot like Josh Mandel in Ohio, and Ted Cruz in Texas, they’re running as real conservatives with very much a Rubio-like message from 2010. Will that work in this environment of demagoguery from the White House?

MR: Yeah, it will work, because the common sense of the American people is powerful, and I think that too many people here in Washington walk around thinking well, we can spin it this way, or we can use our allies in the media to confuse people and make them not believe their own eyes. But the truth is that we’re way past that today. The ability of people to get information from multiple sources in real time, the ability of us to communicate directly to our constituents, to go on programs such as yours and talk about the reality of what we’re facing, is something that wasn’t around not that long ago, and it’s incumbent upon us who feel passionate about this to go out there and make clear to the people what our choices are. And this is not a complicated issue. It’s very, very simple. The United States spends more money than it takes in, and it’s not generating enough revenue for its government to pay down the debt. So we have to figure out how do we stop spending more money than we take in? We need a balanced budget amendment. We need a spending cap. And we need real reductions in spending starting right now. And what do we do to get more revenue in the hands of government so it can pay down its debt and not grow its government? Well, you’re not going to do that through tax increases. You’re going to do that through new taxpayers, that is getting people back to work, getting people hired and working, so these people will pay taxes, and then we can use that revenue to pay down the debt. That’s what we need. And you’re not going to create new taxpayers, you’re not going to create economic growth and jobs in America if you’re running around threatening to raise taxes.

HH: Do you think the President understands the underlying economics, Senator Rubio, and is just demagoguing it? Or is he fundamentally misinformed about how capitalism works?

MR: I think there are three things going on here. Number one, I think he’s a prisoner to extremist elements in his own base who not only, they don’t care that the taxes don’t solve any problems. They want their pound of flesh. They want to punish somebody, they want class warfare. That’s what they believe in. And this is their chance to do it, and they’re putting pressure on him to do that. So I think that’s his first problem. His second problem is that I think he’s surrounded by a bunch of people who philosophically do not believe fully in the free enterprise system, and in fact, they’d like to see government play a greater role. And they see this downturn in the economy, and crisis such as this, as an opportunity to exert more government involvement in our economy. And that’s the second problem. And his third problem is a level of incompetence. I think the President, quite frankly, is not up to the job. And if you look at every measure of quality of life in America today, unemployment is higher. The debt is higher. The only thing lower is the value of your home. If you look at every measurable economic thing in America today, they are all worse than they were the day he took over. Two and a half years into his presidency, things continue to get worse, not better, and it’s because the President is incompetent in his job as president. He is not, he doesn’t know what he’s doing.

I think he’s going to be President one day. And I agree with him on Obama’s competence. The man is not qualified in any way, shape or form to run a lemonade stand, much less to be the President of the most powerful country on the planet. I would like to see a Marco Rubio/Allen West ticket in 2020, after the two Michele Bachmann terms are done.