Republicans and Tax Increases

Bruce Bartlett at Fiscal Times, via Ritholtz:

Back in 1982, Ronald Reagan was persuaded that the deficit was such a severe impediment to growth that a tax increase to reduce it would be economically beneficial. Many in his party strenuously objected, citing research by Republican economists. For example, on August 12, 1982, U.S. Chamber of Commerce president Richard Lesher sent to Congress an analysis of the proposed tax increase. Said Lesher:

“If H.R. 4961 is passed in these troublesome economic times, we have no doubt that it will curb the economic recovery everyone wants. It will mean a lower cash flow as more businesses pay more taxes, with a depressing effect on stock prices. It will reduce incentives for the increased savings and investment so badly needed to improve productivity and create more jobs. It will mean higher prices for many products and services. It will increase government costs in caring for those who, because the economy is held down, cannot find employment.”

It would be hard to find an economic forecast that was more wrong in every respect. Looking at real gross domestic product, it grew 4.5 percent in 1983 and 7.2 percent in 1984 – an exceptionally strong performance. The stock market had one of its best years ever in 1983 – both the Dow Jones Industrial Average and the S&P 500 Index rose 35 percent. There was no increase in the rate of inflation, which was exactly the same in 1983 and 1984 as it was in 1982. The unemployment rate fell from 10.6 percent in December 1982 to 8.1 percent by December 1983 and 7.1 percent in December 1984.
The Chamber was not an outlier. Virtually every Republican economist made similar dire predictions. Economist Arthur Laffer told his clients on July 26, 1982, that the Tax Equity and Fiscal Responsibility Act, which raised taxes by about one percent of GDP, “will stifle economic recovery,” “retard economic growth,” and undercut “the economy’s ability to enter into a period of expansion.” On August 20, 1982, he told his clients that TEFRA “will tend to lengthen and deepen the recession.” Writing in the New York Times on September 12, 1982, economist Norman Ture said the administration’s claim that TEFRA would promote economic growth was “bizarre.” He said it would “weaken the impetus for economic growth” and make the economic recovery “less certain and less vigorous.”
Despite these erroneous predictions, Republican economists said pretty much the same thing when Bill Clinton proposed a tax increase in 1993. On April 12, 1993, the Republican members of the Joint Economic Committee predicted that the unemployment rate would be 0.3 percent higher in 1994 and 1995, 0.5 percent higher in 1996, and 0.6 percent higher in 1997. Real GDP growth would be 0.4 percent slower in 1994, 0.5 percent slower in 1995, 0.8 percent slower in 1996, and a full percentage point lower in 1997.
On August 20, 1993, Laffer told his clients, “Clinton’s tax bill will do about as much damage to the U.S. economy as could feasibly be done in the current political environment.” He said that interest rates would rise and the stock market would fall.
Once again, it would be hard to find a forecast that was more completely wrong.

Arthur Laffer was wrong?  No way.  Republicans were wrong?  Naaa.  Let's see, if they were wrong each of the other times, think they are wrong today, saying the exact same thing? Hmmmm.  Well, it is important to remember that Bartlett worked with Laffer over the years, especially in the Reagan administration, and might very well know that Laffer is a clown.  I've picked up on that, and I've never met the guy.  The Republican insistance on not raising taxes at all to amelierate the deficit is totally asinine, and a good reminder why I can't in good conscience vote for those morons.