Defending Democratic Tax Policy

As I have made clear in the past few weeks, I think the most important issue currently under debate in Congress is the Obama Tax Policy. A recent New York Times piece by DAVID LEONHARDT assesses the pervasive claim that tax cuts are good for growth. The Bureau of Economic Analysis chart he provides tells the whole story:

The obvious policy punchlines are laid out in the rest of the piece, and are specific to the Bush Tax Cuts:

I mean this as a serious question, not a rhetorical one: Given this history, why should we believe that the Bush tax cuts were pro-growth?

Is there good evidence the tax cuts persuaded more people to join the work force (because they would be able to keep more of their income)? Not really. The labor-force participation rate fell in the years after 2001 and has never again approached its record in the year 2000.

Is there evidence that the tax cuts led to a lot of entrepreneurship and innovation? Again, no. The rate at which start-up businesses created jobs fell during the past decade.

But there's a deeper story that is told by the graph.  And it's a story that is deeply supportive of the narrative Democrats need to craft around economic policy if they want to be successful.

The three best five-year periods of economic growth since 1960 were:

1. Kennedy / Johnson (61-65)
2. Clinton (96-00)
3. Carter (76-80)

That's right. Growth in the Carter Administration was better than in either term of the Reagan Administration. And we're not talking about deficits, we're talking about GDP growth. This is the power of the Republican narrative on taxes and the triumphalism of the Reagan Revolution.  The failure of conservative tax policy to spur growth and provide security for the middle class is thoroughly documented.  Yet we still see Democrats parrot claims such as "It would be a mistake to raise taxes on anyone during a recession."  These claims are simply not true and must be confronted directly--because the American people rightly demand more of their government.