Tax Cuts: The Uses of 'Frenzy'.(the election of George W.Bush brings about what is often referred to as a tax-cut feeding frenzy)(Brief Article)

It's bad enough, from the liberal point of view, that taxes are likely to be cut this year. Worse, the size of the tax cut keeps growing. Every other day, some Democratic congressman says he would be willing to tolerate, or some Republican congressman demands, a larger tax cut. For Washington to throw so much money away, scattering it willy-nilly to people whose only claim on it is that they earned it in the first place . . . well, one can understand why liberals would grope for some term to explain this irrational behavior. The capital is in the middle of-a "feeding frenzy."

The term is meant to suggest that the tax cut keeps growing either because business lobbies are scrambling to get special tax breaks while they have the chance or because politicians are one-upping each other to pander to taxpayers. This process caused Ronald Reagan's tax cut to grow out of control in 1981. We suffered from deficits for two terrible decades as a result.

Or so the story goes. In fact, the tax cut Congress passed in 1981 was fairly close in size to the one Reagan proposed, and business tax cuts were a small part of both. The deficit grew largely because inflation fell much more rapidly than anyone expected (bringing revenues down) and because the economy sank into a severe recession (increasing spending and cutting revenues further). In later years, Congress routinely declared Reagan's budgets "dead on arrival" and spent many billions more than he requested. So deficits persisted. But the low- tax, low-inflation economy chugged along: Incomes, employment rates, and investment levels all grew in the years following the tax cut. It was economic conditions that determined the size of the deficit, not vice versa. When the deficit disappeared in the late Nineties, it was because the economy was generating revenues faster than Washington could spend them.

The Reagan tax-cut "feeding frenzy" is a myth. Yet many Republicans- including, weirdly enough, George W. Bush-appear to believe it. Sen. Olympia Snowe, Republican from Maine, has cautioned against repeating the '81 experience. As written, Bush's plan cuts taxes in stages over a period of years. Snowe wants an amendment that would call a halt to the tax cuts whenever the surplus comes in below projections. The idea is perverse both politically, since it would ...