Tax Cuts for Rich do not Spur Economic Growth

GOP kills official report finding tax cuts for rich don’t boost growth

Zachary Roth

7:00 am on 11/02/2012

U.S. Senate Minority Leader Mitch McConnell speaks to delegates during the third session of the Republican National Convention. (Photo: REUTERS/Mike Segar)

Last updated Nov. 2, 7 a.m.
After pressure from the GOP, a nonpartisan congressional agency withdrew a report that found tax cuts for the rich don’t spur economic growth and instead worsen inequality. Staffers at the agency tell MSNBC.com they’re up in arms over the move. And top Democrats, too, want answers.
“The Republicans have been pushing this argument that the top marginal tax rate has this huge effect on economic growth … and there’s just no evidence of that,” said one agency analyst, adding that the decision to disavow the report “wasn’t about substance, it was about politics.”
At issue is a study released in September by the Congressional Research Service, which serves as Congress’s in-house nonpartisan policy research arm.  “The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie,” the study found. “However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.”
Those conclusions put a congressionally-backed dent in the centerpiece of modern-day GOP economics: that lowering taxes for the wealthiest Americans will lead to broad-based prosperity. Republicans, including their standard-bearer Mitt Romney, have been united in opposing an end to the Bush tax cuts for high earners on these grounds.
The New York Times reported Thursday that after pressure from the office of Senate Minority Leader Mitch McConnell, CRS had withdrawn the report, though it remains available online.
Economists familiar with the interplay between CRS and Congress expressed shock. ”I can’t recall this type of political pressure brought to bare against a perfectly solid economic study,” Jared Bernstein, a former top economist to Vice President Biden and an MSNBC contributor, told MSNBC.com. “It is not  melodramatic to assert that this strikes at the heart of democracy.”
A spokesman for McConnell told the Times that the GOP Senate leader and other Republican lawmakers “raised concerns about the methodology and other flaws.”
But an analyst at CRS who asked to remain anonymous dismissed that notion, telling  MSNBC.com: “None of those issues they raised were of any import or made any difference.”
And Bernstein added that the report wasn’t out of step with the mainstream view on the issue. “[It's] findings are consistent with much of the literature on the relationship between tax cuts and growth.”
Indeed, after the top tax rate went up during the Clinton administration,the economy boomed, as the conservative economist Bruce Bartlett has shown in detail.
The decision to pull the report went against the view of the agency’s economists, and provoked outrage internally, according to the analyst, who added: “The message is, if you write something and someone gets mad about it, we throw you under the bus.”
“I know that the economists, and there probably are six or seven who read that report, were in all agreement that there was nothing wrong with the report,” the analyst continued. “The decision to remove the report was made by people who don’t know anything about the subject.”
Another CRS source said the decision had been the subject of “very contentious meetings,” and added: “People are understandably upset that a report that has gone through our normal review process can be pulled.”
The report’s author, Thomas Hungerford, isn’t disavowing it. “I wasn’t involved in the decision, as a matter of fact I was on vacation when the decision was made, so I can’t really add anything to what was reported in the NY Times,” he told Talking Points Memo in an email. “However, I certainly stand behind my work.”
Democrats aren’t taking this lightly. In a letter sent Thursday to CRS director Mary Mazanec, Rep. Sander Levin of Michigan wrote that he was “deeply disturbed” to hear about the report’s withdrawal “in response to political pressure from Congressional Republicans who had ideological objections to the report’s factual findings and conclusion,” and demanded an explanation.
Levin added: “It would be completely inappropriate for CRS to censor one of its analysts simply because participants in the political process found his or her conclusion in conflict with their partisan position.”
The CRS director is appointed by the head of the Library of Congress, of which the agency is a part. But because Congress holds the purse strings for both outfits, it’s no surprise that its leadership could be susceptible to pressure from lawmakers.
The GOP’s apparently successful effort to remove CRS’s seal of approval from the report is just the latest example of the party and its backers working to discredit objective and independent analyses that run counter to their interests. When the Labor Department reported higher-than-expected job growth for September, many on the right suggested the government was cooking the books, or argued that the numbers must be off. And when the Tax Policy Center released a study showing Romney’s tax plan would raise taxes on the middle-c