In 1980 the federal deficit was soaring and Ronald Reagan campaigned on a
singular promise: He planned to cut taxes on everyone, but especially the
rich. He insisted that those benefits would quickly trickle down to
everyone and supercharge the economy. Throw in some social safety net
cuts, Republicans said, and the whole plan would pay for itself.

They were wrong. The rich got lower taxes all right, but the economy
flatlined and the deficit skyrocketed. I should know: I graduated from
college the same summer the tax cut passed, and I spent the next three
years managing a Radio Shack waiting for the economy to get back on its
feet. In 1982 Reagan was forced to raise taxes to make up for his cuts,
and he continued raising them throughout his presidency.

In 1993 Bill Clinton passed a tax increase to reduce the deficit.
Republicans insisted it would do no such thing. In fact, they said, it
would cripple the economy.

They were wrong. The economy boomed, and for the first time since the
Roaring �20s the deficit turned into a surplus for four consecutive years.

In 2001�and again in 2003�George W. Bush passed a tax cut. Once again,
Republicans said it would supercharge the economy and pay for itself.

They were wrong. All we got was a jobless recovery and a housing bubble
that wrecked the economy. It produced the worst economic downturn since
the Great Depression.

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At the beginning of 2013, as part of the �fiscal cliff� negotiations,
Barack Obama forced Republicans to accept a tax increase on high earners.
But even though the bill passed with bipartisan support, some Republicans
insisted it would kill the economy.

They were wrong. The deficit declined and Obama produced the longest
economic recovery in American history�one that was still going strong
until the coronavirus pandemic killed it.

Finally, in 2017, Republicans passed yet another tax cut. This one
primarily benefited corporations and the rich, and once again Republicans
insisted it would supercharge the economy and pay for itself.

They were wrong. No�scratch that. They lied. They knew the evidence of the
past 40 years as well as anyone, but they sold the public a bill of goods
anyway.
Every single economic indicator Republicans said would go up, didn�t.

Why? Because for all of Donald Trump�s bluster, this was the one thing he
really, truly had to do. It�s the one thing the Republican Party�s big
donors insist on. They don�t care about immigration or tariffs. Not much,
anyway. But they care about lower taxes. As then-New York Rep. Chris
Collins (since convicted of insider trading) told reporters shortly before
the tax cut was signed into law, donors were telling him, �Get it done or
don�t ever call me again.� So they got it done.

The 2017 tax cut had to be supported by a farrago of dishonesty for an
obvious reason: The public would never support a tax cut aimed primarily
at making the rich richer and swelling the coffers of large
corporations�which also benefited the rich. Why would they? So Republicans
had to lie. And this time they couldn�t rest with a single lie. Polls
showed that voters were skeptical of their tax cut, so this time Repub�
licans had to pile lie on top of lie.

Why does this matter? For two reasons�one, lies about tax cuts have
determined the course of America�s economy, and the individual fortunes of
millions of families including yours, for decades. Many of the inequities
laid bare by the pandemic have been in the making since the Reagan era.
And two, amid the coronavirus crisis, we�re about to have another debate
over whether tax cuts can juice the economy. To evaluate those claims, it
behooves us to look at what Republicans said about their 2017 tax
cut�compared to what actually happened. Spoiler alert: Every single
economic indicator Republicans said would go up, didn�t.

It all started with the initial justification for the tax cut: namely that
American corporations paid the highest tax rates in the industrialized
world, which put them at a huge competitive disadvantage. So at the end of
2017, while they still had full control of Congress, Republicans passed a
$1.5 trillion tax cut�nearly the size of the gigantic coronavirus rescue
bill passed in March. The 2017 bill contained cuts to both the personal
tax rate�which mostly benefited the rich�and the corporate rate. But
Republicans faced a cognitive dissonance problem: Weren�t American
corporations actually doing pretty well? Why did they need a huge handout?

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This is where the first lie came into play. It�s true that the United
States had a high corporate tax rate, but few American corporations paid
that official rate. In fact, if you look at actual corporate tax revenue,
it turns out the United States has been pretty friendly toward big
business. The real corporate tax rate is middling, and among the 20
richest developed countries, the US tied for dead last in how much of its
GDP comes from such taxes.

This was no secret. So to justify cutting corporate tax rates even
further, Republicans had to manufacture a laundry list of reasons it would
be good for the economy. And that�s when the lies started piling up.
1. Business investment will skyrocket

The first and most fundamental logic behind the Republican predictions
that a corporate tax cut would promote economic growth and higher tax
revenues was a simple one. According to the academic language in a paper
published by the White House Council of Economic Advisers, �A decrease in
the tax rate on corporate profits�decreases the before-tax rate of return
used to assess the profitability of an investment project.�

In plain English this means that corporations will only make investments
that are likely to be profitable. Taxes are part of this, so if you
decrease the tax rate on profits, more investments will go forward. In the
words of Larry Kudlow, the lifelong supply-sider who became director of
President Trump�s National Economic Council, corporate tax cuts produce an
�investment boom.�

But Kudlow�s boom never came. Taxes may matter, but what matters a lot
more is whether corporations have confidence that the economy will grow
vigorously and produce more demand for their products and services. The
Republican tax cut didn�t produce that confidence. Regardless of what they
said in public, most CEOs knew perfectly well that a tax cut was just a
temporary shot in the arm. It might modestly spur consumer demand for a
short time, but in the long run it would do nothing�or maybe even produce
a weaker economy.

Sure enough, business investment, which usually reflects decisions made in
the past, grew on autopilot for a couple of quarters, but after that,
steadily declined. In the last quarter of 2019, the level of business
investment was lower than it was a year before.

You can also look at new orders for capital goods, which generally react
quickly to changes in the economic outlook. But the growth rate of new
orders began declining immediately after the tax cut was passed, reaching
zero in late 2018 and falling into negative territory in mid-2019. (Charts
are adjusted for inflation where relevant and run through the end of 2019,
before the COVID-19 recession took hold.)

It�s been more than two years since the tax cut passed, and if an
investment boom were going to happen, we would have seen it by now. We
haven�t. Trump may like to brag about the �greatest economy in history�
that he claims he built before the pandemic struck, but all we saw was an
investment bust.

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2. The economy will be supercharged

If an investment boom was the big lie that drove everything, the arguments
made to the general public in support of the tax cut mostly revolved
around a better-�known metric: economic growth. The usual way of measuring
this is by looking at gross domestic product, the sum of all goods and
services produced in the United States. In the decade since the end of the
Great Recession, GDP growth has averaged 2.3 percent per year.

Republicans claimed that the investment growth spurred by the tax cut
would drive GDP growth higher. Kudlow predicted growth rates of 3 to 4
percent. Treasury Secretary Steven Mnuchin went with a more modest 2.9
percent. Trump himself told reporters at his Cabinet meeting that he was
holding out for 6 percent growth. These projections were mostly just spun
out of thin air.

So how did we do? Since the investment boom never materialized, it�s
hardly a shock to learn that GDP growth didn�t boom either. The growth
rate increased modestly for two quarters and then dropped steadily. In the
last quarter unaffected by the coronavirus crisis, it was barely above 2
percent. Not only didn�t the tax cut usher in the growth that Republicans
predicted, but growth rates started dropping soon after.