Opinion: Bush tax cuts are still "voodoo economics"

When former President George H.W. Bush referred to Reaganomics as “voodoo economics," he was right on target. Yet, Republicans continue to claim that lowering taxes will result in higher revenues.

Currently, President Barack Obama and the Republican leadership are looking for a mutually agreeable plan that raises the national debt limit and provides a plan for budget deficit reduction over the next decade.

The talks have stalled as the Republicans refuse to consider a balanced plan proposed by the President that combines spending cuts with increases in personal income tax rates. The Republicans' position is that taxes should be lowered from the current level, not increased.

David Stockman, while serving as Director of the Office of Management and Budget for then-President Ronald Reagan, said in 1981 in an interview with The Atlantic Monthly, “Kemp Roth [Reagan’s tax act] was always a Trojan horse to bring down the top rate.

"It’s kind of hard to sell 'trickle-down,' so the supply-side formula was the only way to get a tax policy that was really 'trickle down.' Supply-side is 'trickle-down' theory."

Stockman has continued his thoughts on raising the tax rate, as evidenced by his comments to CBS News' "60 Minutes" in October 2010.

“Extending the Bush tax cuts is rank demagoguery. So to stand before the public and raw rub this anti-tax sentiment, the Republican Party, as much as it pains me to say this, should be ashamed of themselves.”

In 2009, Paul Krugman, economist and columnist for the New York Times, estimated that the tax cuts implemented by President George W. Bush would cost a total of $1.8 trillion in lost revenue.

In a fact check by the Pulitzer Prize-winning PolitiFact, Brian Riedl, who analyzes the federal budget for the Heritage Foundation, a conservative think-tank, said that Krugman’s estimate was generally acceptable, but that it only considered the lost revenue and didn’t account for the economic activity that lower taxes generate.

"I can't believe I'm actually saying one of Krugman's numbers is defensible," Riedl told PolitiFact.

Riedl estimated that the stimulative effect of the tax cuts could shave about 25 percent off of the $1.8 trillion in lost revenue. Accepting his number, the Bush tax cuts cost us $1.35 trillion.

The Bush tax cuts, if extended for another decade, would result in more than $2.1 trillion in lost revenue, according to an analysis by Goldman Sachs cited here.

Let the cuts - which were extended for two years at the end of 2010 - expire in 2013. We need a balanced approach to closing the budget deficit, one that includes both spending cuts and increased tax revenue.

The Bush tax cuts created a new 10 percent bracket and did not change the 15 percent bracket. I propose that those brackets remain unchanged.

This approach does not affect the poor and the middle class and requires but a small sacrifice for those fortunate enough to have taxable incomes in higher brackets.