Did Bush tax cuts cost the U.S. economy $6.6 trillion?
The U.S. economy has recovered the 8.7 million jobs lost during the Great Recession and its unemployment rate is now the lowest it's been in almost six years. But David Cay Johnston, a Pulitzer prize-winning reporter, author and visiting lecturer at Syracuse University's law school and business school, says the economy would be a lot stronger if not for the Bush tax cuts.
Americans have lost $6.6 trillion from 2001, when the tax cuts first took effect, through 2012, according to Johnston. That's more than one-third of the country's annual GDP.
Related: Here’s where all those middle-class jobs went
"When you look at the long-term income in this country and adjust for inflation and population growth, we're not getting better off," says Johnston. He calculated those losses by comparing average incomes in U.S. tax returns from 2000 tax returns to every year through 2012, and published his findings in a recent column on Al Jazeera America.
Mattie Duppler, director of budget and regulatory Policy at Americans for Tax reform, agrees that incomes are lower now than they would have been had the economy grown at a faster pace but she says the Bush tax cuts are not to blame.
Bill Clinton, for example, cut the capital gains tax cut in 1997 which helped boost the economy, says Duppler. "The same policies that supposedly caused so much damage in the early 2000s were already in place in the 1990s under a Democratic president," says Duppler.
She says America's economic problems are due in part to a "huge bureaucracy" in Washington and "politicians trying to control every aspect of what's happening in the private economy." She favors smaller government and tax cuts to accomplish that.
But Johnston says tax cuts in 2001 and 2003 slowed growth while tax increases in 1993 boosted it. Tax cuts leave the government with less money to invest for growth, explains Johnston.
Related: U.S. economy has 'little room for error’: Dan Gross
"We're not investing in the future of America," Johnston tells Yahoo Finance in the video above. "Because we have less revenue, we are not putting the same money we used to put into research ... infrastructure ... [or] education. We are creating a more and more inefficient economy in the name of 'tax cuts will save us.'"
But they won't, says Johnston. "The empirical evidence that tax cuts produce jobs ... just doesn't exist."
Tax increases, on the other hand, are helping to produce jobs in California, where job growth is about 50% faster than the rest of the country, says Johnston. He favors more government investment in research, infrastructure and education and changing incentives so that money flows out of finance and into productive assets.
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