Post Slants Tax Cut Story
Paper begrudgingly admits
economic growth but warns of scary deficits.
by  Amy
Menefee
July 5, 2005
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Reducing the deficit is an idea most politicians and journalists can
get behind – except when it means tax cuts might be working.
    On July 2, 2005, The Washington Post’s Jonathan Weisman
managed to turn a deficit reduction story into a warning about high
deficits.
    The news of the day was “an unanticipated surge of tax
payments may push the 2005 federal budget deficit as much as $100
billion below official forecasts.” Weisman cited the 3.8 percent
growth rate for first-quarter GDP. Instead of reporting the economic
news as it was, however, he couched it in partisan sniping. He
called the idea that lowering tax rates could boost tax receipts a
Republican “theory” and lamented that GDP growth provided “more
ammunition for Republican boasts that their tax cuts are the cause
of this performance.” He then devoted the rest of the article to
making a case against tax-cutting Republicans.
    Highlighting the “nation’s grave deficit challenge,”
Weisman called attention to the size of the deficit despite the
revenue windfall, saying it could still be the “third largest ever.”
    Weisman’s logic was characteristic of journalists’
handling of tax issues, as the Free Market Project showed in its
special report “Tax
& Spin: Five Ways the Media Distort Tax Issues.” Rather than
looking at the dollar figure of the budget deficit, Weisman could
have compared it to previous deficits using percentage of U.S. GDP.
This would put the huge numbers into perspective and prevent
alarmist statements. The projected deficit for 2005 (before the
estimate was lowered) equaled roughly 3.5 percent of GDP, while
1985’s deficit was 5.1 percent of GDP.
    Weisman said conservative economists have predicted
that economic growth would produce more revenue, “possibly enough to
pay for the tax cuts.” He turned to economist Michael T. Darda for
an answer to the question of whether new tax receipts would “recoup
all the revenue loss expected due to lower rates.”
    Calling the lack of tax revenue a “loss” to the
government assumes that the money belonged to the government in the
first place rather than to the taxpayers who earned it. It also
implies that the tax cuts are a direct cause of higher deficits –
that they have a “price” that must be made up in other areas.
Weisman neglected to explore the role of increased government
spending in worsening the deficit. He briefly mentioned a few
factors such as the Medicare prescription benefit and war costs, but
used these as examples with a cautionary quotation from Rep. John
Spratt Jr. (D-S.C.): “Nobody should get euphoric and assume we’re
going to grow our way out of this deficit.”
    But the news, despite Weisman’s attempts to obscure it,
was that the economy and, in turn, tax receipts have grown since the
tax cuts of 2003. Weisman downplayed the effects of the tax cuts,
citing slow economic response to the 2001 cuts. But as Free Market
Project Adviser Dan Mitchell, a tax policy analyst at The Heritage
Foundation, observed, “Tax reductions only benefit the economy if
the ‘price’ of engaging in productive behavior is reduced.” Mitchell
wrote in a June 7, 2005, brief that the 2003 tax cuts did a much
better job of encouraging growth than the 2001 cuts, because they
lifted burdens on individuals and corporations that allowed them to
produce more.
    Mitchell concluded: “This does not mean that the tax
cuts ‘pay for themselves,’ but it does mean that the right kind of
tax policy – lower tax rates on work, saving, and investment – will
lead to faster economic growth. And faster economic growth means
more income for the government to tax. In other words, the best way
to generate tax revenue is to expand the ‘tax base.’”
    And the best way for journalists to report on taxes is
to leave the partisan rhetoric to the politicians.
To read Dan Mitchell’s brief on tax cuts,
visit
here:
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