Is Obama's Tax Cut the Biggest in History?
Thursday February 12, 2009
The Democrats have been so busy defending federal spending, and denigrating the stimulative power of tax cuts, that they apparently either forgot to -- or felt they couldn't -- point out something rather dramatic: the tax cuts in this stimulus plan appear to be the biggest in history.
The compromise stimulus plan includes $282 billion in tax cuts over two years.
According to the Wall Street Journal, Bush's first two years of tax cuts amounted to $174 billion. A second batch in 2004 and 2005 cost $231. And those were thought to be bigger than the tax cuts offered by Reagan, Kennedy or others.
Now, perhaps some new analysis will show that the tax cuts end up not quite being the largest in history by this measure or that. But it's clear they're massive.
I'm ducking the debate on whether this is economically good or bad -- but surely it ought to be a big story.
It leads to two further points. The fight got boiled down to: Democrats want spending. Republican want tax cuts. This is partly the media's fault for following the script layed out by the Congressional leaders, but it also represents a lost opportunity by Obama. In his press conference, he mostly made the case for spending. He didn't make the case for the massive size of his tax cuts.
Second, Obama kept a campaign promise that few Republican thought he'd keep. If this weren't part of a larger package, that would be an enormous story. A liberal Democrat in the campaign promised the biggest tax cut in history. Republicans said it was a complete charade (and many liberals didn't much like it anyway). And the Democrat in his first few weeks delivers the tax cut.
http://alchemytoday.com/2009/02/10/h...ts-in-history/
I looked into this the other day. Bush's cut was the biggest (in dollars) in history in terms of its 10-year effect. It's 2-year effect wasn't quite as large because some provisions came online slowly -- a reason why it was criticized for being poor as countercyclical stimulus. Obama's cuts cost less in the long run than Bush's, but that have roughly the same effect on the bottom 80% of taxpayers in terms of change in after-tax income. Over the first two years, it's possible that the stimulus cuts are the largest in history if you don't correct for population growth.
Aside from all of that, the cuts in the stimulus are undoubtedly one of the largest middle-class tax cuts in history and probably the largest cut for the bottom quintile in history. The GOP will have a hard time running away from this vote in 2010 ("but but but we wanted even more tax cuts" probably won't cut it).