Congressional leaders meeting with Vice President Joe Biden are inching closer to an elusive budget deal that could combine effective tax increases (via lower rates and fewer exemptions) with cuts across domestic spending and health care programs. The AARP's tacit acknowledgement that Social Security cuts are inevitable is the latest indication that the Biden rounds could produce what the Gang of Six, Gang of Five, Deficit Commission and twenty-odd other deficit deals could not. A vote.
But as Congress crawls toward compromise, some presidential candidates are slouching toward partisan piffle. Former Minnesota Governor Tim Pawlenty says he can balance the budget and cut taxes by $8 trillion, because tax cuts increase revenue. Cool trick! How does it work?
In an interview with Slate's Dave Weigel on June 13, he claimed "when Ronald Reagan cut taxes in a significant way, revenues actually increased by almost 100 percent during his eight years as president. So this idea that significant, big tax cuts necessarily result in lower revenues - history does not [bear] that out."
Pawlenty's statistic is mostly wrong. His conclusion is fully wrong. First, revenue didn't double during Reagan's eight years. It increased by 65 percent, from $600 billion in 1981 to $990 billion in 1989 in nominal terms.