NY Times: Do Tax Cuts Lead to Economic Growth?

New York Times:  Do Tax Cuts Lead to Economic Growth?, by David Leonhardt:

The defining economic policy of the last decade ... was the Bush tax cuts. President George W. Bush and Congress, including Mr. Ryan, passed a large tax cut in 2001, sped up its implementation in 2003 and predicted that prosperity would follow.

The economic growth that actually followed -- indeed, the whole history of the last 20 years -- offers one of the most serious challenges to modern conservatism. Bill Clinton and the elder George Bush both raised taxes in the early 1990s, and conservatives predicted disaster. Instead, the economy boomed, and incomes grew at their fastest pace since the 1960s. Then came the younger Mr. Bush, the tax cuts, the disappointing expansion and the worst downturn since the Depression. ...

Today, Mitt Romney and Mr. Ryan are promising another cut in tax rates and again predicting that good times will follow. But it’s not the easiest case to make. Much as President Obama should be asked to grapple with the economy’s disappointing recent performance (a subject for a planned column), Mr. Romney and Mr. Ryan would do voters a service by explaining why a cut in tax rates would work better this time than last time....

When the top marginal rate was 70% or higher, as it was from 1940 to 1980, tax cuts really could make a big difference, notes Donald Marron, director of the highly regarded Tax Policy Center and another former Bush administration official. When the top rate is 35%, as it is today, a tax cut packs much less economic punch. ...

Mr. Romney puts a higher priority on tax cuts than anything else. Yet the reality of the last two decades has caused conservative economists, and Mr. Ryan himself, to acknowledge the limits of tax cuts. ... [W]hen you dig into Mr. Romney’s and Mr. Ryan’s proposals and you consider recent history, the fairest thing to say is that, so far at least, they have laid out a plan to cut taxes. They have not yet explained why and how it is also an economic-growth plan.

(Hat Tip: Mike Talbert.)