Posted on 10/02/2018 8:57:46 AM PDT by Kaslin
I have spent some three decades railing against faulty budgetary scoring of tax bills, but the latest charade from the Congressional Budget Office and Joint Tax Committee takes the cake. The story of fiscal phony math is so indefensible when it comes to the Trump tax cut that you may not believe it could be true. Alas, it is.
The story starts with the CBO forecast in 2017 that over the next decade the national debt will double to 150 percent of GDP in about 20 years. Those are debt numbers that don't have a happy ending – just ask the citizens of Puerto Rico, Detroit and Greece.
This pessimistic forecast was based on a CBO prediction before President Barack Obama left office that economic growth would average over 20 years between 1.7 percent and 1.8 percent. Growth that low doesn't come close to generating the tax revenues to keep pace with shoot-the-moon federal spending trends.
But President Donald Trump's economic program was always predicated on getting pedal-to-the-metal growth of 3 percent to 4 percent each year. (Trump actually wanted 5 percent growth, but even Larry Kudlow and I thought that was too high to aim for. We might have been too unambitious.)
Economist Larry Summers of the Clinton and Obama administrations and many others on the left assured America that 2 percent was the best we could possibly achieve because America was suffering from a slow-growth paralysis he called "secular stagnation." They believed that since Obama averaged less than 2 percent growth over eight years (and 1.6 percent in his last year in office), it would be inconceivable for a blowhard like Trump to get us to anywhere near 3 percent.
But growth has rocketed to above 4 percent over the last two quarters and it's a brand-new ball game. Just since the tax cut passed some nine months ago, the CBO has increased its estimate of economic output by a gargantuan $6.1 trillion over the 10-year window of 2018 to 2027.
Because the federal government soaks up about 18 percent of the economy in taxes, this unexpected surge in prosperity will generate roughly $1.1 trillion more revenue for the federal government. The states and cities will also pick up about $500 billion more. Amazing.
Now here's where things start to get interesting. More growth means more revenue to the government, which means lower deficits in the future, right? Not according to the CBO. It actually now says the Trump tax cut, which was originally estimated to cost $1.5 trillion by the Joint Tax Committee, is this year suddenly inflated to about $1.9 trillion.
Here is how Politico explained the $400 billion rise in the deficits caused by the tax bill:
"CBO found the economy was stronger last year than previously estimated, and that puts a higher price tag on the tax cuts because more people would otherwise be paying higher rates this year. On top of that, CBO now believes top earners will get less of the income pie in the coming years, which means less revenue coming into the government."
This is the most convoluted logic in modern times. Thanks to the tax cut and other Trump policies, growth is $6 trillion higher. And yet because tax rates are lower, CBO says the feds will get less of that extra money in revenues.
CBO is genetically incapable of giving Trump the credit for the booming economy. In fact, he's penalized for it. Any sane person would say the deficit is going to be somewhere near $1 trillion smaller as the economy booms. Not $400 billion larger.
Even more remarkable is that CBO says the rich will get a smaller share of the economic pie over the next decade. Wait a minute. I thought the Democrats said this was a tax cut for millionaires and billionaires. Guess not.
Incidentally, this exact forecasting error happened in the Obama years – except in reverse. Because the growth rate was much lower under Obama than expected, the GDP was $2 trillion lower over Obama's two terms. It turns out the "stimulus" package failed to stimulate.
Trump's tax cut is only 9 months old so it is too early to say it is paying for itself. But already well over half the projected cost has evaporated because of higher growth. If we stay on this 3 to 4 percent path for another couple of years, the flood of added revenues will mean smaller deficits and much smaller debt levels relative to GDP.
What makes this all the more remarkable is that most Democrats are running for Congress this year promising to repeal or rollback the Trump tax cut, even though it has helped get us to 4 percent growth in a mere 18 months. They are sticking to their script that the tax cut will not work even though we can all see that it is working.
I told you that you wouldn't believe this.
Lowering taxes(rates) actually HELPS to cut debt due to increased revenueLow taxes with massive Government spending. Ya can’t cut debt doing that. - Theoria (
True, for the same reason that - even without price regulations - prices are finite. If you overprice something, people do not choose to do it - even if that “thing" is legitimately earning money, and the “price” is a tax rate."Ya can’t cut debt “ by overspending. Still less can you do it if you “overprice” your “merchandise” with high tax rates.
In addition, we have been losing about a trillion dollars a year in trade deficits; while equalizing that imbalance does not affect the govt debt, it does affect our annual economic deficits, which adds to economic growth in various ways. It is stunning to see how quickly the economy is turning around - proof that much money has been sitting on the sidelines, or cached off shore, in rsponse to the Obama / Harvard economic disaster.
The CBO has been a partisan hack office for a long time - so much so that one wonders if they even understand how taxes affect the economy. They foster the propaganda that the economy is a 'pie' and the more that one entity gets of that pie, the less the rest can have. If that were true, we would still have the same economy we had after WWII. That would be true if we were still on the gold standard. It is good to back up the dollar with gold, but it has to have a growth dynamic, not a constant 1:1 type ratio... we have much greater intrinsic value than gold alone.
Money is taxed when it is moved; money sitting in a can cannot be taxed directly. Lowering taxes motivates more economic activity (movement) which raises more govt. revenues. The CBO never seems to have grasped this true dynamic.
LOL I was thinking that DC is just like a majority of those who win a million bucks and are broke in 7 years.
If you continue to connect reducing tax rates with the debt you are playing into the Democrats hands. Spending and revenue are polar opposites. What needs to happen is reduce spending and reduce tax rates but you can't seem to get there. You have a cognitive problem I usually associate with liberals...
I wish you’d quit posting you are an embarrassment. What you are saying is tax rates need to go up to reduce the debt. THAT IS CRAZY. THAT DOESN’T WORK, IT REDUCES REVENUE BECAUSE THE ECNOMY DOESN’T GROW.
Second. You are much older than me. You don't care about the added debt to myself and countless millions. Party like there is no problem.
Keep on celebrating tax cuts and I will always bring up the added debt for not restricting spending. For all the growth generated, it has been done on the back of debt. Good luck to you when we start fixing that.
Moore really explains things having to do with the Federal budget in a tremendous manner.
You think raising taxes would help reduce the debt. It will not. In addition you think I am against spending cuts, somehow you link being for tax cuts then automatically makes someone calling for spending increases? Moreover to you, if person A is for tax rate reductions then person A must also be a government spend thrift? THE TWO ARE NOT CONNECTED OR RELATED TO EACH OTHER. Tell me, can someone be for tax rate reductions AND be for spending cuts?
How your mind works or doesn't is amazing. I am all about spending cuts because that needs to be done but has nothing to do with increasing revenues with tariffs and tax rate cuts.
You are OLD school stupid GOPe. I care deeply about he debt but fighting ignorance like you show is critical to getting the Republicans to stop the stupid which you are a prime example.
Please go over to the DU where you belong. You sound like Juan Williams to me.
This better be Trump’s next big priority. The entire fiscal situation remains extremely dangerous IMO.
WTF do you think we are doing!! We are not cutting .gov spending! . Massive pumping of the economy with .gov spending and tax cuts. That is keynes. That is reagan 2.0 Good grief. There is no escaping interest rates. No doubt, you are a older person.
Historian Peter Pugh has stated that a key cause of the economic problems afflicting America in the 1970s was the refusal to raise taxes to finance the Vietnam War, which was against Keynesian advice.[81]
Thank God they didn't listen to Keynes because raising the tax rates would have made revenues drop even more....
You are right about the 1980s; spending was the problem BUT NOT LOWERING TAX RATES. REVENUES DOUBLED IN THE 1980s did you know that?
And we did that on the back of .gov spending. Which we almost trebled the national debt! Increased .gov spending with tax cuts. Reagan 2.0 Increased revenue with more debt! How is that on the long term?
Your argument that we will fix the deficit without cuts is the test. The only recent example has been Reagan, how did that work out for us concerning debt? We are going to grow faster than the spending of the.gov without cuts? Make your case. And that is on the back of rising interest rates.
'God help me. I will try again, Keynes was for higher taxation and more govenment spending and not lowering the tax rates.'
You're so wrong. Keynes advocated increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression. Not to make it policy forever. He wanted a balanced budget. Not what these politicians do today.
Listen, please quit being an idiot. I will try to talk to you like you are third grader so maybe you can understand. A guy is married. He loses his job and his "revenue" goes to zero. His wife can still go out and spend on the credit cards. Get it? The revenue has nothing to do with the spending.
If you can't understand that you are incompetent, a loser. An embarrassment to Free Republic. If you keep trashing Reagan's economic policy I will keep calling you stupid. Was there too much spending in the 1980's? HELL YES. But there was a cold war gong on "youngster", you wouldn't know about that would you? This was somewhat offset by skyrocketing revenues due to growing economy which was caused by TAX RATE CUTS.
If you would take an hour and research government revenues you would see that I am correct. Every time taxes were cut in a major way like in both 1963 & 1983 for example, REVENUES grow substantially. Look at the raw data.
Like you, Keynes also stupidly thought lowering taxes rates always decreased revenue. This is fallacy. Every heard of the Laffer curve? I am sure you have. It is just common sense.
Rising debt has destroyed any long term gains. Especially for the younger generations. Yes, Reagan grew the economy. But, that was debt based growth. Just like now. Do you think we will continue growing like this once we are forced to cut the trillion each year in additional spending and faced with higher interest rates and servicing the debt? And, more to the point, the GOP were 'against' spending during the Obama years, but Trump has signed off on a larger budget, etc, etc. That debt will not be on you, since you are much older than I.
“Low taxes “
What low taxes?? We have massively HIGH taxes.
“You keep expecting a different result from repeating the same things. “
You mean like higher taxes and higher spending with the Democrats?? The Tax-n-Spend Democrats??
You obviously know nothing about taxes and revenue. Typical Democrat that thinks raising taxes increases revenue when raising taxes actually decreases revenue.
“That is reagan 2.0”
It wasn’t Reagan, sunshine. Reagan demanded spending cuts 2:1 over revenue, but the Democrats that controlled the House since 1955 kept spending the extra revenue and then some.
Get your facts straight. Your liberal propaganda doesn’t work with us educated folk.
“Yes, Reagan grew the economy. But, that was debt based growth.”
No, it wasn’t. It was production-based growth. Your Democrats kept spending more than what revenues grew. The Reagan tax cuts grew revenues but the Democrats kept spending on social programs.
“This is Reagan 2.0. Massive .gov spending”
No, it was Democrats spending since 1955. They controlled the House from 1955 to 1994.
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