The Providence Journal’s still-new PolitiFact feature, with the market-hook Truth-o-Meter has generally been worth a perusal and sometimes a thorough read, although I’ve thought the journalists behind it could shoot for bigger targets much of the time. For today’s review of a statement by state rep. and congressional candidate John Loughlin (R., Tiverton), though, they seem to have drifted a bit — claiming that a statement on the economic benefits of tax cuts was “barely true.” Here’s the statement that PolitiFact fact checked:
After Ronald Reagan cut taxes in 1981 the U.S. enjoyed “exponential growth.”
Before looking at the substance of the claim, we need to adjust PolitiFact’s parameters:
Taken literally, “exponential” refers to growth at an ever-increasing rate, as when something doubles, then triples, then quadruples. The economy during the Reagan years did no such thing.
Actually, it would be more accurate to suggest that the literal meaning of “exponentially” is not so much a reference to continual, unceasing growth, but to growth that is so large that it is best expressed in terms of exponents (x-squared and such). The growth of the economy in 1982 was actually recessionary, but in 1983, according to PolitiFact, it was 4.5%, and in 1984, it was 7.2%. Especially considering that nobody actually means “exponential growth” literally in public discourse, it isn’t unreasonable to suggest that such growth fits the bill.
But the more important question is whether the statement is accurate by non-literal standards. PolitiFact offers two arguments in the negative. First, journalist Eugene Emery notes that growth thereafter “returned to a fairly typical 3 percent and 4 percent, which (while healthy) isn’t exponential by any standards. Second, he points out that Reagan’s 1981 tax cut was followed by tax increases, of various forms, in 1982, 1983, 1984, 1986, and 1987. He then asks Loughlin why “he mentioned only Reagan’s tax cut and not the subsequent increases.”
Perhaps if he hadn’t been in a gotcha frame of mind, the journalist would have looked at the prima facie nature of his own question, particularly after he’d heard the following from a professional economist:
We asked Edinaldo Tebaldi, an assistant professor of economics at Bryant University, about the timing. He said it takes one to three years “to fully see the benefits of tax cuts.”
In summary, Reagan (in concert, of course, with the rest of the federal government) cut taxes in 1981, and two and three years out, the economy grew. He then allowed taxes to increase, and after the same lag, the growth moderated. By the terms of the Projo’s own fact-checking team, the evidence would indeed support the statement that tax cuts offer a very significant boost to the economy.