The Washington Post claims to analyze the quality and accuracy of campaign ads for its readers. BTP gives the Post a failing grade for its analysis of a Rudy Giuliani campaign ad. The ad shows Giuliani saying that "I know that reducing taxes produces more revenues. Democrats don't know that." The Post's analysis of the ad asserts that Giuliani's claim is "a matter of fierce dispute among economists." That is not true. There are few if any economists who claim that cutting taxes will increase revenue. In fact, Douglas Holtz-Eakin, who was one of President Bush's top economic advisors, had the Congressional Budget Office analyze the evidence for tax cuts increasing revenue. Examining a broad range of models, Holtz-Eakin concluded that the growth effects of tax cuts could offset between 1 and 22 percent of the lost revenue over the first five years and as much as 32 percent over the second five years. In short, Holtz-Eakin found that with the most favorable possible assumptions, growth could only offset less than one-third of the lost revenue from tax cuts, and even this gain was only obtainable for a short period of time. Economists don't hotly dispute whether it is possible to increase revenue by cutting taxes, only people who are trying to deceive the public claim that it is possible to increase revenue by cutting taxes.
--Dean Baker
