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What The Media Tell Americans About Free Enterprise

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July 1996


Tax and Pretend About Budget Deficit

Here we go again. With Republican presidential candidate Bob Dole pondering a large tax cut proposal, many in the media are telling their viewers and readers that cutting taxes is inimical to balancing the budget.

"When you talk about a balanced budget and then you talk about big tax cuts, that's smoke and mirrors," argued NBC's Tim Russert, questioning House Speaker Newt Gingrich on the June 2 Meet the Press. "Bob Dole has been searching for a campaign issue that will mark clear-cut differences between himself and Mr. Clinton," stated ABC's Peter Jennings on the June 3 World News Tonight. But with taxes, "has Mr. Dole painted himself into a corner?" A week later, on the June 10 show, Jennings asked Dole in an interview: "Cutting taxes or the budget deficit, how can you do both?"

That doing both is impossible has been an article of faith for reporters for years.

Since the 1980s, especially the late 1980s, reporters have repeatedly blamed budget deficits on tax cuts. In 1989 and 1990 they scolded George Bush for promising not to raise taxes and urged him to change his mind. On July 18, 1989, CBS Evening News reporter Mark Phillips, for instance, referred to "the stubborn budget deficit that most economists say will never be seriously reduced without the new taxes to which the President [Bush] remains opposed."

"We cannot simply sidestep what is happening by resorting to old ideologies and new slogans," stated Mortimer Zuckerman in the February 6, 1989 U.S. News & World Report. Asked Zuckerman: "Who wants to read Bush's lips when to do so in the face of gigantic budget deficits means the slow decline of the America we know and believe in?" And correspondent Richard Threlkeld, on the October 16, 1990 CBS Evening News, opined: "So if and when they do sort out that deficit mess it's likely the rich are going to get soaked, at least a little, to make up for the soaking they avoided in the `80s."

But are tax cuts really such bad policy? Bruce Bartlett, a senior fellow at the National Center for Policy Analysis, points out in the May 27 Washington Times that when tax cut detractors are "asked for evidence that the American people suffered from [President] Reagan's tax cut, they have none to offer except the budget deficit."

This is a spurious argument, Bartlett maintains. "In fact, the tax cut had nothing whatsoever to do with the increase in federal budget deficits in the 1980s. On average, federal receipts as a share of GDP were higher in the 1980s than in the 1970s -- 19.0 percent of GDP versus 18.5 percent." According to Bart-lett, the deficit increase was caused by massive spending increases, with outlays increasing from 20.6 percent of GDP in the 1970s to 23.1 percent in the 1980s.

Bartlett demonstrates that real economic growth averaged 3.9 percent per year between 1982 and 1989, more than double the average for the 1990s. He also points out that "real median family income increased by $4,564 between 1982 and 1989, an increase of 12.6 percent, while it has fallen by $2,108, a decline of 5.2 percent in the low deficit 1990s."

If, as is most likely to be the case, tax cuts become part of the debate in this year's campaign, reporters should at least be skeptical of those who claim that they inevitably lead to higher deficits and other dreary economic outcomes.


Rich Noyes


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