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The Bush Tax Cuts and the Deficit Myth (Spending, not tax cuts, is what's causing the deficits)
Wall Street Journal ^ | 07/13/2010 | Brian Reidel

Posted on 07/13/2010 6:37:50 AM PDT by SeekAndFind

President Obama and congressional Democrats are blaming their trillion-dollar budget deficits on the Bush tax cuts of 2001 and 2003. Letting these tax cuts expire is their answer. Yet the data flatly contradict this "tax cuts caused the deficits" narrative. Consider the three most persistent myths:

• The Bush tax cuts wiped out last decade's budget surpluses. Sen. John Kerry (D., Mass.), for example, has long blamed the tax cuts for having "taken a $5.6 trillion surplus and turned it into deficits as far as the eye can see." That $5.6 trillion surplus never existed. It was a projection by the Congressional Budget Office (CBO) in January 2001 to cover the next decade. It assumed that late-1990s economic growth and the stock-market bubble (which had already peaked) would continue forever and generate record-high tax revenues. It assumed no recessions, no terrorist attacks, no wars, no natural disasters, and that all discretionary spending would fall to 1930s levels.

The projected $5.6 trillion surplus between 2002 and 2011 will more likely be a $6.1 trillion deficit through September 2011. So what was the cause of this dizzying, $11.7 trillion swing? I've analyzed CBO's 28 subsequent budget baseline updates since January 2001. These updates reveal that the much-maligned Bush tax cuts, at $1.7 trillion, caused just 14% of the swing from projected surpluses to actual deficits (and that is according to a "static" analysis, excluding any revenues recovered from faster economic growth induced by the cuts).

The bulk of the swing resulted from economic and technical revisions (33%), other new spending (32%), net interest on the debt (12%), the 2009 stimulus (6%) and other tax cuts (3%). Specifically, the tax cuts for those earning more than $250,000 are responsible for just 4% of the swing.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Constitution/Conservatism; Culture/Society; Government; News/Current Events
KEYWORDS: bushtaxcuts; deficit; spending; taxcuts
If there were no Bush tax cuts, runaway spending and economic factors would have guaranteed more than $4 trillion in deficits over the decade and kept the budget in deficit every year except 2007.
1 posted on 07/13/2010 6:37:52 AM PDT by SeekAndFind
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To: SeekAndFind
Let's touch one off and see what happens.

How bills become laws in the age of The Obowma. The NAZI's Enabling Act of 1933 sold by the drink.

2 posted on 07/13/2010 6:40:00 AM PDT by Tarpon (Obama-Speak ... the fusion of sophistry and Newspeak. It's not a gift, it's just lies.)
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To: SeekAndFind

3 posted on 07/13/2010 6:43:01 AM PDT by Diogenesis (Article IV - Section 4 - The United States shall protect each of them against Invasion)
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To: SeekAndFind

4 posted on 07/13/2010 6:44:59 AM PDT by Diogenesis (Article IV - Section 4 - The United States shall protect each of them against Invasion)
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To: SeekAndFind

Great analysis. Unfortunately, far over the heads of the average liberal, in or out of Washington.


5 posted on 07/13/2010 6:45:15 AM PDT by erkyl (We hang the petty thieves and appoint the great ones to public office --Aesop (~550 BC))
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To: SeekAndFind

Income to the federal government INCREASES every time taxes are cut. It’s just a FACT. But naturally, we can’t have news like THIS leak out to the peasants. Might be a wee bit upsetting as every leftist demands tax increases.


6 posted on 07/13/2010 7:35:50 AM PDT by Oldpuppymax
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To: Oldpuppymax
Income to the federal government INCREASES every time taxes are cut. It’s just a FACT. But naturally, we can’t have news like THIS leak out to the peasants. Might be a wee bit upsetting as every leftist demands tax increases.

No, it's NOT a fact. There may be very good arguments for specific tax cuts just as there may be very good arguments for specific spending. But the idea that a general income tax cut will increase revenue is false and, to my knowledge, is not supported by any serious economic study. Read the analysis at http://www.econdataus.com/taxcuts.html and tell me what specific numbers or conclusions you disagree with. Alternately, provide a link to one serious economic study that purports to show that general income tax cuts increase revenues over what they would have been otherwise. Thanks.

7 posted on 07/18/2010 11:27:46 AM PDT by remember
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To: remember

When Kennedy lowered marginal tax rates, the economy pulled out of recession and grew and federal tax revenues soared.

When Reagan lowered marginal tax rates, the economy pulled out of recession and grew and federal tax revenues soared.

When Bush 41 compromised with the democrats and signed the democrat tax rate increase, the economy stalled and fell into a brief recession, but started recurring a year before clinton took office.

When Bush 43 lowered marginal tax rates, the economy grew and federal tax revenues soared.


8 posted on 07/20/2010 2:50:33 PM PDT by VRWCmember
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To: VRWCmember
When Reagan lowered marginal tax rates, the economy pulled out of recession and grew and federal tax revenues soared.

As mentioned at http://www.econdataus.com/taxcuts.html, revenues did nearly double during the 80s, after Reagan's tax cut. However, they had likewise doubled during EVERY SINGLE DECADE SINCE THE GREAT DEPRESSION! They went up 502.4% during the 40's, 134.5% during the 50's, 108.5% during the 60's, and 168.2% during the 70's. At 96.2 percent, they nearly doubled in the 90s as well. Hence, claiming that the Reagan tax cuts caused the doubling of revenues is like a rooster claiming credit for the dawn.

Hence, tax revenues did not "soar" after Reagan and they most definitely did not "soar" after the Bush 43 tax cuts. In fact, they were very much subpar in the latter case. Once again, read the analysis at http://www.econdataus.com/taxcuts.html and tell me what specific numbers or conclusions you disagree with. Alternately, provide a link to one serious economic study that purports to show that general income tax cuts increase revenues over what they would have been otherwise. Thanks.

9 posted on 07/22/2010 8:56:27 AM PDT by remember
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To: Oldpuppymax
Income to the federal government INCREASES every time taxes are cut. It’s just a FACT.

Actually, I thought the most interesting fact in the article, and one I wasn't previously aware of, is that revenue has remained very, very close to 18% of GDP, consistently for the last fifty years!

That's despite of low tax rates, high tax rates and other variations in domestic economic policy.

IOW, the only effect of high tax rates is reducing economic growth, and the only effect of lowering taxes is increasing economic growth. The increase in government revenues from lower taxes is, apparently, entirely incidental to this sole effect. Incidental, of course, to an effect that benefits all citizens and is good in itself! This should be the primary take-home message.

10 posted on 07/25/2010 8:52:29 AM PDT by Stultis (Democrats. Still devoted to the three S's: Slavery, Segregation and Socialism.)
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To: Stultis

Historically, the increase in revenue does NOT benefit all citizens. Both Republicans and Democrats used it in the 1960s, 1980s, and 2000s to increase spending and the deficit. The one exception I am aware of is the 1920s when the federal government actually used most of the revenue from tax cuts to reduce the national debt.


11 posted on 07/25/2010 9:00:26 AM PDT by Captain Kirk
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To: Stultis

Historically, the increase in revenue does NOT benefit all citizens. Both Republicans and Democrats used it in the 1960s, 1980s, and 2000s to increase spending and the deficit. The one exception I am aware of is the 1920s when the federal government actually used most of the revenue from tax cuts to reduce the national debt.


12 posted on 07/25/2010 9:00:34 AM PDT by Captain Kirk
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To: Stultis

Historically, the increase in revenue does NOT benefit all citizens. Both Republicans and Democrats used it in the 1960s, 1980s, and 2000s to increase spending and the deficit. The one exception I am aware of is the 1920s when the federal government actually used most of the revenue from tax cuts to reduce the national debt.


13 posted on 07/25/2010 9:00:34 AM PDT by Captain Kirk
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To: SeekAndFind
Article also available at Heritage:

http://www.heritage.org/Research/Commentary/2010/07/The-Bush-Tax-Cuts-and-the-Deficit-Myth

14 posted on 07/25/2010 9:04:02 AM PDT by Stultis (Democrats. Still devoted to the three S's: Slavery, Segregation and Socialism.)
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To: Stultis
Actually, I thought the most interesting fact in the article, and one I wasn't previously aware of, is that revenue has remained very, very close to 18% of GDP, consistently for the last fifty years!

Following is what the article said:

Over the past 50 years, tax revenues have deviated little from their 18% of gross domestic product (GDP) average.

This is why I always attempt to check sources and not accept anyone's interpretation of them. The article said "deviated little" and you interpreted this to be the same as "very, very close". More important, however, is the fact that "deviated little" is a highly questionable interpretation of the data. The following graph shows total tax revenues and total individual income tax revenue from 1980 to 2005.

Effective Tax Rates and Revenue: 1980-2005

The actual numbers and sources for this graph can be found at this link. As can be seen, total revenue varied from 16.35% of GDP to 20.86% of GDP and revenue from individual income taxes varied from 7.03% of GDP to 10.34% of GDP during that period. I don't know how one can call these deviations "little". In any case, the graph shows that there was a relatively close correlation between these two revenue levels and the corresponding effective tax rates that generate them. I explain all of this in much more detail at this link.

I try to fact-check all claims that I hear in the political arena but I pay especially close attention to these "amazing facts" that both sides occasionally come up with. A careful analysis of the data almost always show these to be a simple sleights of hand, so to speak. The actual facts usually turn out to be much closer to what one would expect them to be.

15 posted on 07/26/2010 11:57:01 PM PDT by remember
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To: remember

BOOKMARK!


16 posted on 10/09/2010 11:03:32 AM PDT by mainestategop (Don’t Let Freedom Slip Away After America , There is No Place to Go)
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