Tax Cuts: Now More than Ever.(Brief Article)

Over the last few years, Republican politicians have learned to defend tax cuts on grounds of fairness. Simple fairness demanded an end to the marriage penalty; the estate tax was unfair as a form of multiple taxation; tax cuts generally were a way of reducing an unfair "tax overpayment" (a.k.a. the budget surplus). These moral arguments were thought, correctly, to be more powerful in times of plenty than economic ones would be.

But the politics of prosperity may be coming to an end. Alan Reynolds, director of economic research at the Hudson Institute, points out that the evidence of a recession is stronger now than it was in the autumn of 1990. Retail sales and industrial production have been falling since September. Housing starts and light-vehicle sales peaked a year ago. It is time for Republicans to dust off the economic argument for tax cuts: that they improve incentives to work, save, and invest.

That means that those tax cuts stimulating economic growth ought to be at the top of the agenda in Washington. The conventional wisdom there suggests the opposite. Republican congressional leaders such as Denny Hastert have suggested that Congress should first pass tax cuts with bipartisan support, such as the elimination of the marriage penalty and of the estate tax, before turning to the tougher task of reducing income-tax rates. But that course would allow Democrats to block the economically important rate cuts by claiming to have cut taxes already.

Bush may be able to get some Democrats to support lower tax rates, but the only way to reach a grand bipartisan deal that enjoys the support of ...