One of the easiest ways to recognize a liberal is their refusal to accept that the universe is dynamic rather than static. The most obvious example of this is their perpetual inability (or unwillingness) to grasp the notion that increasing taxes and growing regulations impact taxpayer behavior. This can be seen in on a number of levels. On the state level it can be seen by companies and wage earners fleeing high tax locales for those with low taxes or no income taxes. Rush Limbaugh famously left New York two years ago for the zero income tax comfort of sunny Florida. Then Governor Paterson responded by demonstrating his state’s disdain for the people who actually fund New York’s nanny state spending: “If I knew that would be the result, I would’ve thought about (raising) the taxes earlier.” And New York is not alone… New Jersey, Maryland and many others have also seen taxpayers flee their states in recent years.
California too is befuddled by the exodus of taxpayers from the progressive Nirvana Democrats have been creating there over the last 40 years. In 2010 an average of 3.9 companies a week moved their operations out of California due to high taxes and burdensome regulations. During the first four months of 2011 that number increased 25% to 4.7 companies leaving per week… and taking their jobs with them! What is the destination of choice for those companies? Not surprisingly, Texas, with its minimalist regulation mentality and no income or capital gains taxes. California officials were so flummoxed by the exodus that a delegation of (mostly Republican) legislators and Democrat Lt. Gov. Gavin Newsom went to Texas to talk with erstwhile California companies about why they had left the not so Golden State.
Again, not surprisingly, the answer was obvious… High taxes and burdensome regulation. For decades California socialists in Democrat clothing assumed Golden State economics were static and that they could simply raise taxes or increase regulation and employers would simply suck it up. Of course they were wrong, but they (and California’s voters) have yet to figure that out.
At the federal level, Barack Obama is the lead siren singing the “Tax the rich” song, ostensibly to try and shore up Uncle Sam’s finances. Last week the President said: “I believe that we can’t ask everybody to sacrifice and then tell the wealthiest among us, well, you can just relax and go count your money…”
In an environment where fully 47% of the people in the country pay either zero income taxes or actually get “rebates” for taxes they didn’t pay, Obama and the Democrats want to hike taxes on the people who actually choose to put their capital at risk and produce the jobs that fuel the economy. And like all good Democrats, they feel like they can simply raise taxes and the rich will automatically fall in line and fork over more money without making any adjustments in their behavior.
Strangely enough, that’s not quite how things work as human nature on the federal level is no different than on the state level… when taxes go up, people change their behavior. While most people are not going to move to another country if their federal taxes are raised, they will do what they can to reduce their tax burden, from investing in foreign markets, to parking their money to hiring high powered accounting firms to help them shelter their income.
Nearby is a table whose data is drawn from IRS numbers showing tax rates from 1986 to 2005. The table focuses in on the top 1% of tax filers and isolates the tax rate and the share of overall taxes paid. The third column is a ratio I created that I call the Prosperity Ratio. (My apologies if someone has used the ratio earlier, I’ve just not seen it.) Essentially it is the average income tax rate paid by the top 1% divided by the percent of the overall income tax burden paid by the persons in that same 1%. I’ve dubbed it Prosperity Ratio because the higher the ratio, the more people who are prosperous and happy… When taxes on the “rich” are lower they get to keep more of their money, which of course makes them happy. Simultaneously those same taxpayers pay a larger percentage of the overall income tax burden, which means that the remaining tax payers are happier as well because they are paying a smaller portion of the overall income taxes. Everybody wins.
To demonstrate how this Prosperity Ratio works, in 1986 when the average tax rate paid by the top 1% of taxpayers was 33.13%, they paid 25.75% of all federal income taxes resulting in a Prosperity Ratio of .78. By 2005 when the average rate paid by the top 1% had dropped to 23.13%, they were paying 39.38% of all federal income taxes, generating a Prosperity Ratio of 1.70. Everyone won as the rich, able to keep more of their money were motivated to create more wealth, generating more revenue for the tax collector. The other 99% of taxpayers were happier as well as they were able to keep more of their income too. It should be the goal of the government to generate the highest Prosperity Ratio by cutting taxes as until the ratio starts declining.
Don’t hold your breath of course. Liberals live in a fantasy world where they can raise taxes or increase red tape and the world magically bends to their will and everyone lives happily ever after. Unfortunately for the rest of us we have to live with the real world consequences of their static delusions. Maybe now is a good time to have a discussion about the difference between static and dynamic, or in the lexicon of a liberal, fantasy and reality. And maybe this time we should include the people who keep voting for them…
See author page
@Dink Newcomb:
Dirk, add to that, the move doesn’t LOSE the union even one job!
It merely adds other jobs ELSEWHERE.
Where’s the ”union-busting?”
ummm…. no, receipts were not flat. Below chart created from US Govt Spending doesn’t show that at all.
Carter recession, start of Reagan cuts/increases yielded increasing revenues as percent of GDP. Clinton revenue didn’t start it’s increase from his tax increase, but rather after the implementation of capital gains cuts later in his term. We started into a recession at the end of Clinton’s second term.
Bush cut the taxes during that Clinton recession, piled on with the economic impact of 911, and tax receipts again started on the upswing until the housing market and financial crash. The downward spiral projected out to 2015 hinges largely on O’healthcare tax increases.. which are being collected without paying out for the reason they are being collected… for four years.
And no, the debt has not been paid down steadily since 1945. And in fact it’s been since the 1940s that the debt has steadily increased and out of control as the SS recipients matured, and even more after the 60s when Medicare kicked in and started taking care of seniors immediately. It becomes progressively worse and more of the nation’s populatio piles on to these two entitlement programs. They cannot be disconnected when it comes to debt…. you can only delay the impact of those programs based on population’s aging.
Prior to the New Deal, the US did, indeed, pay down more manageable debts for past wars. The entitlement programs, and the government getting into pension plans which they could borrow against for increased spending/intragoverment holdings – adding to the debt – cinched that.
In fact, when you look at the Carter recession/Reagan years, it’s miniscule compared to what happened with the Clinton recession/911 impact, then topped off with the housing/banking crash.
So do I assume you support QE methods for bailing the nation out?
@Hard (#52): I’d like to respond, but I’m at a loss to determine to what you are referring.
You say:
I can’t very well address your charges unless you provide a specific example. In my numerous discussions on this topic, I’ve provided links to both data and to the analyses of a wide range of conservative economists.
Now it’s my turn:
You believe that tax cuts pay for themselves (meaning that tax cuts do not create more Federal debt). Kindly provide a link to any data or data analysis which shows that tax cuts generate sufficient economic activity to pay for the lost revenue owing to the reduction in tax rates or the presence of new deductions and/or credits. Kindly provide a link to reputable economists (conservative or otherwise) who are willing to back the claim that tax cuts do not increase Federal debt.
I’ve provided a very substantial amount of data and links to the opinions of numerous conservative economists who support my point of view. Kindly provide specific, direct rebuttal to any points I have made, supported by data and/or informed opinion. Then we can have a perhaps fruitful discussion, on the merits of the opposing points of view.
– Larry Weisenthal/Huntington Beach, CA
We seem to have a conceptual problem here. Reducing tax revenue while increasing spending adds to the Federal Debt. Reducing tax revenue while cutting spending below anticipated revenues does NOT add to the Federal Debt, and it begins a slow reduction of the debt each year Congress does not overspend it’s tax revenues.
Again we come down to the basic belief that you think if the government increases taxes, they will not increase spending commensurately. History shows that to be the stuff dreams are made of. With inflation, the reserve status of the dollar in jeopardy for rapid devaluation, affecting energy and oil prices, double dip housing recession, the idea of raising taxes on an already in trouble economy with continued high unemployment, and no spending cuts in sight from either party, is a recipe for utter failure. The “austerity” is to be aimed at government, not the taxpayers. This is quite simply evidenced by the fact you could abscond every penny earned in this nation by everyone, and it still would not reduce the debt for decades.
@Gary Kukis, #35:
Of course. I’ve said repeatedly that there are two components that must be addressed to remedy our fiscal dysfunction: spending, and revenue. We need less of one and more of the other. Less of both won’t balance the equation. Nor, as the video linked in #29 suggests, will voters stand for it.
Nothing wrong with this statement. However there is only so much taxpayers can bear in increased taxes in particular economic trends. When the economy is booming, it is more able to be absorbed. Not in this economy. This is why, even tho gas was higher and price per barrel was higher in the 2007-08 run up, taxpayers could bear the additional costs better than now. Or more simply put, you cannot suck blood from a turnip.
@openid.aol.com/runnswim:
That is the only comment I need to see here to know what you believe. My words to you; No one HAS to sacrifice.
Now, before you go off commenting about something I haven’t written, let me be clear. I believe in a government that is run in accordance with constitutional principles, and that any taxation in order to allow that to happen is not a sacrifice, but a payment of debt to a government put in place to protect their inalienable rights, including those from outside, and inside, the country.
What you and I disagree on is the amount of debt the American people must be subjected to, as it relates to the annual cost of government. You still miss the points in relation to taxation that I’ve made, and insist on presenting your same argument. I’m not buying it, not because your information is wrong, but because the conclusions you draw from that information is incomplete.
I did see that you stated that everyone’s taxes should go back to a certain point, and on that, I can respect the fact that you, at least, are not playing the class warfare game that the public is exposed to from DC. However, with any amount of tax hikes that you care to name, the amount of spending cuts to be made, in order to put the government on more stable financial footing, is many, many times greater than the tax hikes. I would hope that you don’t think that adding nearly $1 Trillion to our budget, over the course of just two and a half years, is sustainable by simply raising taxes.
Bingo….
@mata:
You say:
First paragraph, above: In principle, I agree with you. In fact, I’ve stated, many times over, that cutting taxes along with an equivalent cut in spending is responsible (non-voodoo) economics. Unfortunately, that’s not what was done during the 8 years of Reagan and the 8 years of George W Bush. What was done in those years was granting massive tax cuts, which were not accompanied by any spending cuts. These tax cuts were financed by massive borrowing, which did provide an economic stimulus, but not nearly enough to even begin to pay for money lost to the treasury through the reduction in tax rates, and, thus, the borrowed money never got paid back and the debt ratio zoomed upward, after having been steadily declining for 35 years, through 7 different Presidencies, through boom periods and recessionary periods, through wars and the national freeway system and the Great Society and the Arab oil embargo and hyperinflation and stagflation.
Remember “Show me the money!” (asked of Jerry Maguire) and “Where’s the beef?” (asked by Walter Mondale). Well, show me the cuts and where were the cuts, is my response to paragraph 1.
In paragraph 2, you are arguing that the present economy is so fragile that it needs the stimulus effect of the $2.1 trillion dollar extension of the Bush tax cuts passed last December, or else we’ll get a double dip recession. It’s perfectly reasonable to move away from a debate about the effect of tax cuts on national debt into the new area of what current fiscal policy should be, going forward.
Ireland and the UK went with austerity programs, and they are worse off that we are. We went with a stimulus combining spending with tax cuts, followed by an extension of the massive, deficit-producing Bush tax cuts. So far, we are doing better than the Irish and the Brits. But our debt level is starting to get out of control.
What I’d do, fiscal policy-wise, to expand/modify my previous post, is precisely what I stated: Restore tax levels to what they were in the 1990s. The economy is coming back pretty well, right now. I’d start the tax restoration gradually, and build back up to where they were in the 1990s, over two to three years.
I see that you just posted #54:
Let’s look at the raw numbers from the years in question:
I said that tax receipts went up, tracking along with increases in the GDP, except following Reagan’s and then Bush’s tax cuts. Here’s the actual, complete, unmassaged data, year by year which backs that up:
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200
Example:
Tax receipts (in billions of constant FY 2005 dollars):
1981: 1,251
1982: 1,202
1983: 1,113
1984: 1,174
1985: 1,250
1986: 1,277
1987: 1,375
1988: 1,421
1989: 1,494
1990: 1,508
1991: 1,473
1992: 1,467
1993: 1,511
1994: 1,617
1995: 1,691
1996: 1,775
1997: 1,889
1998: 2,040
1999: 2,136
2000: 2,310
2001: 2,215
2002: 2,028
2003: 1,901
2004: 1,949
2005: 2,153
2006: 2,324
2007: 2,414
2008: 2,288
2009: 1,906
Just as I said, actual tax receipts were relatively flat during the Reagan and Bush years, even as GDP was robustly increasing.
During the Clinton years, with the Clinton-Rubin tax increases, actual tax receipts went up steadily (compare/contrast 1990-1993 with 1993-1997 — pre-capital gains cut). With regard to your assertion that the capital gains cut was responsible for anything worthwhile, regarding the national debt — no, it wasn’t.
http://www.cbpp.org/cms/index.cfm?fa=view&id=1286
You go on to say:
That’s not what I said and it’s a misleading representation of what happened. What I said (and what happened) is that the debt ratio (the ratio of national debt to GDP, which is the only meaningful metric between nations and between different time periods in the same nation) was steadily paid down from 1.1 post World War II to 0.3 post Jimmy Carter, despite many recessions, hyperinflation, the Arab oil embargo, the Vietnam War, the national interstate highway system, the Marshall plan, the GI bill, and the Great Society — through 35 years and 7 Presidents, until Reagan introduced the Great Experiment of supply side economics, meaning that you can give massive tax cuts to stimulate the economy and they will generate enough revenue that you won’t have to borrow money to pay for the money you lost with the tax cuts.
Well, Reagan tried it and Bush doubled down and the effect — both times — was to balloon the debt ratio upward (this was even before the recent financial meltdown), while Clinton and every President back to Truman (omitting Reagan) cut the debt ratio.
Tax cuts don’t pay for themselves. They always increase debt and necessitate increased borrowing. I’ve previously provided links to 10 conservative economists who agree with this statement. So give me a link to a cogent argument, by any respected economist who maintains that tax cuts do not increase the debt and do not require increased borrowing.
No disrespect to your armchair economic analyses, but it shouldn’t be hard to find someone who agrees with you, if you are correct. I’d really like to read what she/he has to say. The Heritage Foundation doesn’t agree with you, even. Read through their “hide the decline” language and they admit that tax cuts necessitate increased borrowing. So it’s a ponzi scheme. Reagan and Bush bought prosperity and economic expansion through generational theft, whereas the Clinton and the 7 Presidents before Reagan paid down the debt (adjusted for GDP).
– Larry Weisenthal/Huntington Beach, CA
You repeat posted your raw constant 2005 revenues, and call them “flat”. I pointed out, Larry, that unemployment was at a high after Carter of 9.7% when Reagan came into office, and got them down into the mid 5%s by the time he left…. circa 1985-89. Now look at the graph of tax revenues to GDP percent that is posted from US Govt Spending, and based off treasury numbers. There is no “flat” and “robust” GDP during those first years. Again, you can’t use raw data billions of revenue as a comparison when the workforce and unemployment are not apples to apples in an economy.
Larry, there hasn’t been an admin yet that has had a budget that hasn’t spent more than revenues taken in… including your hero, Bill Clinton. In fact, there hasn’t been such an admin since the New Deal days. Why do you only begin the mark of time with Reagan, and ignore all that transpired before, which includes creating of two major entitlement programs that weighs the most heavy on our debt? Entitlements that grow more massive as time moves on because of the age demographics of the population?
I don’t disagree that both tax rates and Fed Reserve handling of the prime rates and currency should have been handled differently once we started to recover. The problem is the housing bubble… which may have been manageable had Greenspan not kept the rates so low for too long, combined with EZ money, that drove up the prices of housing. That’s a span of about 2 years or so… between 2005 and 2007, when the bubble’s head starting becoming more frighteningly apparent to the brain dead Congress.
As far as new fiscal policy going forward, I remain the same. The population cannot handle tax increases in this economic climate of debt, inflation and dollar devaluation. This means the primary turn must be austerity measures on the bloated, top heavy government. When the unemployment changes, the fed knocks off 24/7 printing of bogus dollars and the dollar rebounds (if it can), and the economy starts recovering, then we can revisit taxes. At this time, no.
Larry, you agreed with me that tax cuts with increased spending do add to the debt, but tax cuts and spending at or below tax receipts do *not* add to the debt. Then you come in 12 or so paragraphs later, and repeat the same verbal faux pas. No, tax cuts do not always increase the debt. Increased irresponsible spending always increases the debt, and it’s that spending that necessitates borrowing. You may be willing to give what select Congresses in the past a pass…. 30 of the 39 sessions were controlled by Dems since the New Deal era. I am not. Government officials adding to the debt is not because they aren’t stealing enough from me, but because they spend irresponsibly… and created mammoth entitlement ponzi scheme programs that will only come under control when the Greatest Generation and Boomers die off.
No clue what you’re talking about, Larry. Your “behind the decline” link was to an American Thinker article about climate change, not to any Heritage Foundation study or commentary. I linked to the Heritage article at early turn of the century which stated the expressed caveats I pointed out above, specifically naming those taxes that do not necessitate borrowing. However, if Congress insists on new spending legislation every year, no amount of tax increases will ever keep up with their fiscal irresponsibility.
I see you have no comment on dynamic scoring as a more accurate analysis of tax policies, past, present and future. Could it be because, like the Heritage Foundation noted, the inaccuracy of the status quo way of analysis is convenient to a pro taxes agenda?
Larry, and Greg, too, if he’d care.
Apparently Chicago had, for a long time given water FREE to non-profits.
Chicago’s Mayor-elect Rahm Emanuel promised to end that perk, if elected.
Well, he was elected.
(To be honest, most non-profits around the country pay for their utilities.)
Wednesday Rahm added that non-profits could be stripped of property tax exemptions to help solve the city’s financial crisis.
“This is not a limited pie. We should not see this debate as downtown vs. neighborhoods. Let us grow that pie so we’re not in this race against zero-sum gain.”
How about it, Larry? Greg?
Do you want to see non-profits stripped of their traditional tax-exempt status so that Rahm can put children into schools 12 + hours a day?
Rahm’s determined to lengthen the school day, in part, so schools don’t have to chose between reading, math and music.
I guess he wants Chicago to be a lab test case for Arne Duncan’s plan to force children into schools 12+ hours a day.
@openid.aol.com/runnswim:
Part of the trade-off in the Reagan administration ended up being more spending by Congress. It would have been nice had reduced tax rates been accompanied by reduced spending. Same with Bush. I don’t think there are many people at this website who would have preferred a reduction in spending.
One of the keys to the economy during Clinton’s tenure was Reagan’s lower tax rates and prosperity along with reduced spending to get the balanced budget.
@Nan (#61): Interesting new topics.
With respect to non-profits paying property taxes.
Let me toss that question back at you. Case in point. I run a for-profit laboratory. I run it out of a commercial building, of which I’m a 50% owner. I have to pay property tax on the commercial building. In principle, I could incorporate as a non-profit, pay myself a salary, and avoid the property tax.
So the question is what type of non-profit? Churches? Well, then you get into the area of “legitimate” churches and those housing “designer” religions, cults, etc.
Planned Parenthood is a non-profit. Should they be tax exempt?
I think that non-profits which truly do good deeds for society deserve to be supported. And people who use non-profits as tax-shelters don’t deserve to be supported.
The devil is in the details.
With respect to education, I’m for more of it. Kids from countries which outperform us on educational achievement tests (e.g. Finland, South Korea) have a longer school day. I’d personally like to see us go in that direction.
– Larry Weisenthal/Huntington Beach, CA
@Gary:
I agree that cutting defense and welfare spending was worthwhile, but Clinton-Rubin also pushed through a pretty big tax hike in 1993. It’s one of the reasons why the Dems got creamed in 1994. Everyone likes tax cuts. Even when they add to the national debt. No one likes tax hikes. Even when they reduce the national debt.
– Larry Weisenthal/Huntington Beach, CA
johngalt, hi, I like when you mentionned It’s not a sacrifice , yes what are they putting in the pot of money?, they want to tax, well they are not in need of those AGENCYs to serve them but not WE,
THEY ARE THERE TO SERVE WE, NOT TO BE SERVED , THEY ARE NOT KINGS IN THERE,
If they want to ask the people’s money, they must start to cut on their hHOUSE BUDGETS AND SHOW BY EXAMPLE, this is not the case, and the people don’t have to sacrifice for OBAMA’S PARTYS,
but the reverse ,let him sacrifice where it will hurt, and let him feel the frustration of the AMERICANS ,
let the elected sacrifice on their job so to bring money in the pot, just like the PEOPLE THEY
WHERE ELECTED TO SERVE, AND NOT SPEND THAT MONEY ON STUPIDS MULTIPLE AGENCYS THAT ARE SPROUTING TO FIT THEIR FANCYS FOR THEM BUT NOT FOR THEE.
@mata (#69):
Here’s a better view of your treasury revenue graph:
There was a pronounced dip in revenue in 1982. You can call this the “Carter Recession,” if you want to maximize your political points, but it was actually the Volker recession, caused by breathtaking Federal Reserve interest rates, which were necessary to kill the hyper-inflation which was kindled by Nixon and Ford (just to play a little of your game). It was a recession and it was an intentional recession and it did — finally — tame inflation and it had as much or more to do with subsequent economic recovery than Reagan’s tax cuts.
Anyway, once recovered from that, tax receipts were flat until Clinton’s tax hikes of 1993, despite rising GDP and engendering a massive reversal in the previously-existing 35 year history of progressive pay down of the GDP-adjusted national debt.
With regard to the Heritage Foundation, I was merely using “hide the decline” as a metaphor. The climategate scientists were perplexed that global temperatures were falling after a peak in 1998. So they (some charge) attempted to hide this by burying it within extraneous data.
Heritage Foundation and like minded economists made the claim that tax cuts would pay for themselves. When they discovered that they didn’t pay for themselves, they basically buried the lead — using “dynamic scoring,” among other tools. “Dynamic scoring,” by the way, is mainly a method to forecast future economic effects of tax policy than to rewrite the well-established history of tax cuts of 30 years ago. Anyway, “dynamic scoring” doesn’t change the unanimous conclusion that tax cuts cost the treasury massive amounts of money which must be made up by increased borrowing and increased debt (when such tax cuts are unaccompanied by concurrent spending cuts, which is how all the tax cuts since Reagan up to the present have been carried out — tax cuts without commesurate spending cuts).
If you want to read a neutral evaluation of dynamic scoring and what this says about tax cuts and tax revenues, here’s a very nice summary: http://www.cbpp.org/files/7-12-06bud2.pdf
i didn’t ignore everything before Reagan. How many time do I have to repeat the statistic that every one of the 7 Presidents before Reagan managed to pay down the GDP-adjusted debt, despite economic downturns and spending upturns every bit as great as those which Reagan had to deal with, while only Reagan (and Bush, who also pursued voodoo economic tax policy) were the ones to massively increase debt?
I keep saying — sure, cut taxes, as long as you cut spending at the same time. But the idea that you can cut taxes in a vacuum — without cutting spending — and expect the Laffer Curve to magically recover your lost revenues and prevent increased debt — is pure, 100%, unadulterated voodoo.
– Larry Weisenthal/Huntington Beach, CA
Larry, Larry… do you think the effects of any Congressional/POTUS policy stop the year of the election? Why did you decide to blow up the very same graphic I gave you, ending in 2000 and not showing the after effects of the Clinton recession and the 911 attacks? Pray tell, why do you think Clinton’s own Treasury dude, Tempalski, did an update in 2006 of his study that “downgraded” the glory Clinton years? Look at the comparison graphs of the 1998 and 2006 revision I posted above. ooops.
Shame shame…. you should know better.
INRE the Heritage Foundation, another shame on you. They specifically echoed your claim that generally a tax cut would not “pay for itself” (I thought that would get you excited… LOL), BUT… then put in the “buts”, of which Reagan used in his tax policies. The “metaphor” doesn’t do much for me. Apparently, I didn’t get your nuance because of the lack of actual relationship to the debate at hand.
Oh yes… forgot to add INRE your CBPP link… here’s the Heritage Foundation counter to the same. Or perhaps only your choice of non profit think tanks are honorable and credible?
@Nan G #61:
I wonder if that includes all Muslim Peace and Prosperity (Kill the Infidel) Organizations. Somehow I would bet they will get an exemption.
Although this graph only covers the last 10+ years, I think it covers some important points all in one graph.
From the left-hand you chart the federal outlays VS the federal receipts.
From the right-hand you chart our federal debt on a quarterly basis.
@Dink Newcomb:
It’s called ‘pull’, and right now, that is how government works.
@mata: We were discussing mainly Reagan. I wanted to focus your attention on my claim that tax receipts increased until pre-Reagan administration’s, then flattened until Clinton’s tax hikes, then flattened again after Bush’s tax cuts. EVEN AS GDP WAS INCREASING, tax revenues flattened with tax cuts, leading to precipitous increases in Debt to GDP ratio, which never occurred in an administration which did not institute massive tax cuts, dating back to World War II.
But then you challenged my statement that tax revenues flattened — directing my attention to a graphic of long term tax receipts to GDP. This graphic supported my view rather nicely — but I needed to “blow up” the period in question (from Reagan’s tax cuts through Clinton’s tax hikes) to illustrate this.
Short term recessions have minimal effect on debt levels — going all the way back to WWII. In the 50s, 60s, and 70s, we had economic downturns every bit as severe as the short term “Carter Recession” (an intentional recession, triggered to finally kill the hyperinflation spiral) and the “Clinton Recession” (a perfectly normal and short term correcting recession resulting from garden variety business cycle events). But previous recessions and previous spending and previous inflation did not lead to massive increases in the GDP-adjusted debt ratio — that only occurred as a result of our ill-fated experiment with supply side (“voodoo”) economics.
The “hide the decline” metaphor was perfectly appropriate. Supply side economic theory didn’t square with reality, but rather than acknowledging this in a straight forward fashion, supply siders simply invent new metrics and propose new theories to justify tax cuts unaccompanied by commensurate spending cuts.
Let’s be 100% clear.
1. No tax cuts of the past 40 years have ever paid for themselves. All added to the deficit, added to the debt, and required increased borrowing.
2. The only two Presidents to increase the GDP-adjusted national debt since World War II were Reagan/Bush 41(lumped together) and Bush 43. They did so by massively cutting taxes, while not cutting spending in a commensurate fashion.
3. A tax cut, unaccompanied by a spending cut, is every bit as much of a Keynesian economic stimulus as a spending increase. Cutting taxes $2.1 trillion, without cutting spending by a similar amount, necessitates borrowing at least 2/3 or more of that amount, to make up for the revenue shortfall. So continuing the Bush tax cuts is a Keynesian stimulus, paid for by borrowed money, which dwarfs the Obama/Democratic 2009 “stimulus” in terms of inflicting generational theft.
– Larry Weisenthal/Huntington Beach, CA
@Nan G:
One has to wonder, if we didn’t have the housing bubble bust, if the revenue would have equaled outlays. They were merging, from the standpoint of looking at that graph.
@openid.aol.com/runnswim:
That is about the biggest bunch of hogwash I’ve ever seen posted here.
1. Tax cuts are NEVER, and can never be considered, Keynesian style economic stimulus, since the very nature of Keynesian economics states, essentially, that government makes the policy decisions on money, and where to spend the dollars, rather than the private sector. That is why dolts like Krugman insist that the Stimulus was too low an amount, and needed to be more. Keynesian economic theory relies on central planning to make economic decisions, completely contrary to the theory of free-market economics, which allows that the private sector knows best how to spend it’s money.
2. The biggest reason that tax cuts are “paid” for by borrowed money is that federal spending is never cut. Another reason is that there is always a lag factor from the time that tax cuts are instituted until the economic activity cuts unemployment and increases the number of taxpayers.
3. Your claim about the Obama Stimulus is absolutely wrong, based on a couple of things. A) The Stimulus added to many government agencies baseline budgeting. B)It was nearly $800Billion, of borrowed spending, in one year, that increased federal spending for years beyond what it would have been without it. C) It bailed out states, many of whom used funds to continue their own spending increases instead of actually using fiscal sanity, and many of those states are still in budget trouble, which will prompt another round of bailing them out. The stimulus was much, much worse than Bush’s tax cuts, as far as increasing generational theft.
Repeat it until you get it right, Larry. Since 1935, they’ve been collecting, and spending/borrowing against, SS tax revenues that were not being paid out in to the extent that they are now. The same goes for Medicare, starting in 1965. I will again say, there isn’t a Congress since the New Deal who has had a budget that did not have deficit spending. Thereby, they cannot “pay down the debt”
This is the same “fuzzy math” that Obama uses when they project O’healthcare for ten years, but only paying out benefits for 6 of them.
No one here has EVER… I repeat *EVER*… suggested that, Larry. It is only you who keeps alluding to that.
Added:
How about that deficit to spending… keeping in mind they are collecting more taxes via SS since 1935. Are they “paying it down”? Or is it hovering, as it’s done since our nation’s birth?
And gee… what happened in 1935 and 1965 to explode our deficit and debt? Hint…..
BTW… I know you’re fixated on Reagan vs Clinton. But do you happen to notice the continued uglies related to that “centrist” you treasured in this past election?
@Mata (#76):
I want to apologize for my obvious lack of clarity in explaining the central point of my argument.
You keep arguing in terms of either gross debt or yearly debt to GDP ratio. I keep arguing in terms of cumulative debt to GDP ratio. So both of us are arguing at one another without directly addressing the points of the other.
Here’s what I’m talking about.
http://talkandpolitics.wordpress.com/2011/04/10/debt-to-gdp-1940-2010/
or, if you prefer:
http://zfacts.com/metaPage/lib/National-Debt-GDP-L.gif
Let’s say that we are not talking about government, but are, instead, talking about buying a house. A good real estate agent prequalifies potential buyers on the basis of their ability to service the debt incurred in purchasing a home.
At a certain ratio of debt (and therefore, debt service) to income, the debt (mortgage) is affordable by the buyer. Above this ratio, the debt(mortgage) is not affordable. All real estate agents have to deal with this issue, with each and every potential client, on a daily basis.
Look at the chart.
http://talkandpolitics.wordpress.com/2011/04/10/debt-to-gdp-1940-2010/
or:
http://zfacts.com/metaPage/lib/National-Debt-GDP-L.gif
After World War II, the debt ratio (analogy: mortgage to income ratio) stood at 1.2. The Greatest Generation taxed themselves to pay off their war debt. The result was a steady drop, all the way down to 0.32 at the end of the Carter Presidency, despite intervening deep recessions, Korean and Vietnam Wars, Arab oil embargo, interstate freeway system, Great Society, inflation and stagflation, etc.
Then Reagan massively cut taxes without cutting spending. The nation literally borrowed its way to prosperity. Tax revenues flattened (shown in data presented in earlier comments) while GDP increased and expenditures increased. At the end of the GHWB Presidency, debt ratio had doubled from the end of the Carter presidency. Yes, there had been an absolutely garden variety recession (actually triggered intentionally by Volcker to tame hyperinflation), but this was not unusual by historical standards of the prior 30 years, when the debt ratio was being paid down through 7 prior Presidential administrations, who actually raised taxes, when necessary to pay for wars, social spending, etc.
Far from “exploding” the debt, the debt ratio was, in fact, paid down to only 25% of what it had been, following WWII to the end of the Carter administration. But, in 12 short years, the policies of Supply Side (“voodoo”) economics had again DOUBLED the debt ratio, wiping out much of the taxation sacrifices made previously to pay down this debt.
Then Clinton raised taxes and the debt ratio again came down. And then GW Bush cut taxes drastically, and the debt ratio shot back up. And then the financial meltdown occurred, which is a topic for an entirely different discussion.
You statement about debt “exploding” post World War II isn’t accurate. Debt didn’t “explode.” It came down. Until Reagan.
You quote me:
“I keep saying — sure, cut taxes, as long as you cut spending at the same time. But the idea that you can cut taxes in a vacuum — without cutting spending — and expect the Laffer Curve to magically recover your lost revenues and prevent increased debt — is pure, 100%, unadulterated voodoo.”
To which you respond:
“No one here has EVER… I repeat *EVER*… suggested that, Larry.”
So let’s make this perfectly clear. Tax cuts (in the absence of commensurate cuts in spending) do NOT generate sufficient economic activity to increase revenue sufficiently to make up for the revenue shortfall caused by the tax cuts and therefore the tax cuts engender increased borrowing and increased debt.
If you will — once and for all — stipulate that the above is factually true, then we can finally call it a day, with respect to this contentious issue.
I’ll save your last remark concerning my assessment of Obama’s performance for another time.
– Larry Weisenthal/Huntington Beach, CA
@openid.aol.com/runnswim:
I know you directed that last post to Mata, but I wanted to comment on this, from your post:
I still don’t believe that you are placing all the factors within your conclusion. One item you are missing is time. I would agree that initially, after a tax cut, that without cutting spending, federal revenues tend to flatten out, however, if given time, they most certainly would get to the point where they could be described as ‘revenue neutral’ “spending”, if one actually described it as spending, which I don’t. This is evidenced by Nan’s posted link in #71, and the only reason that it didn’t reach that point is due to the housing bubble bursting.
As for Reagan and his tax cuts, and the spending of the government at the time, we increased defense spending, partially to make up for Carter’s neglect, but mostly to outdo the USSR, which they couldn’t keep up with, and we broke them. But, as to his cuts in taxes, those accomplished what they were set to do, which was to ignite an economic boom. Do you believe that the tech revolution of the 90’s would have been possible, to the extent that it was, if not for those tax cuts placing more wealth back into private hands? I don’t.
BTW, Bush had the same issues, as far as defense spending and trying to make up for the previous President’s neglect of the military. I was in the Navy during the 90’s and know firsthand of the gutting of our military that happened during that time.
So, time is one essence you are failing to note, when making your absolute that you stated in the above quote.
But let us assume that you are completely correct, for the moment. Based on that assumption of your absolute, the converse should also be true, correct? Namely, that any hike in spending should see an appropriate tax hike, in order to prevent increased borrowing and additional amounts added to the debt. And then, based on those assumptions, can we not then make the leap that in order to either “hold the ground” at worst, or commence to pay down the debt slowly at best, that either, a given tax rate schedule can be tied to government spending, OR, and this is a VERY important point, that government spending can be tied to a given tax schedule?
Now, remembering that last assumption, we can state, with near certainty, that government spending, in a limited, Constitutional government, would be low enough to incur only modest tax rates, much lower than even what we have today, and that massive, overreaching, unConstitutional government, such as we have today, should require higher taxes, in order to “hold the line” on debt. Correct?
So then, what we have isn’t really a discussion of any particular tax rates, whether one believes as conservatives, that lower taxation is a good thing, or if one believes as you, that a somewhat higher tax rate must be applied, or as many liberals, that taxes must be much, much higher on the “rich”. What we have, then, is a discussion of the appropriate size of government, that is taking place within a discussion of tax rates.
If that is the case, then I still come to the same conclusion about tax rates, namely, that the current tax rate must be held, and that spending must be brought down significantly from the massive increases Obama has added. And I argue this based on the amount of spending in the federal budget that has no ties, no basis, and no place, within a Constitutionally limited government.
Liberals believe that government spending can, and in some cases, must, be high in order to pay for the numerous social programs they believe in, and in growing the bureaucracy, adding layers and layers of regulation over business and industry, and that central planning is the way to prosperity.
Conservatives believe that the taxation on the population must remain low, to limit the size of the federal government to only that which is specified within the Constitution, and that a government whose only involvement in business and industry should be to the point of protecting one’s rights from another’s encroachment and no farther.
You are wasting your time with Larry, John. He deperately wants to believe that tax cuts lead to deficits due to reduced revenue.
When it was shown to him how revenue went up during Reagan’s tenure due to tax cuts he claimed it was because of “raw tax” collection, but offered no proof. In fact, when asked several times to produce proof he ignored the requests entirely. I’ve seen him do that on other issues near and dear to his heart when it becomes clear he’s using wishful thinking and not facts. Frankly I think he continues to make the same argument over and over to convince himself that he’s right.
The second I saw the post by Vince I mentally nicknamed it “Larry bait”.
@Hard Right:
While I am in somewhat agreement with your comments, one thing I will acknowledge about Larry is that he isn’t coming at this from stating that the “rich” should be paying more, and then forgetting about everyone else, like Greg does. He discusses this from the standpoint of taxation across the entire spectrum of taxpayers. Greg is a wealth redistributionist, who comes at this issue from the standpoint that the “rich” are not paying their “fair share”.
As to why I posted that, I don’t believe that I am wasting time. I might comment later on why I posted this, if it ever gets responded to.
@John: You are speaking in entirely theoretical terms, and, while I respect your armchair analysis as much as I respect Mata’s, I can tell you in advance that you won’t be able to find a reputable conservative economist who will, after the experience of the past 30 years, agree with the concept that tax cuts ever generate sufficient increased revenue to recapture the money lost to the treasury by virtue of cutting tax rates or increasing tax deductions. I have already posted links to at least 10 conservative economists who agree with the conclusion that tax cuts don’t pay for themeselves and, in the absence of commensurate spending cuts, require increased borrowing and generate increased debt.
On the contrary, tax hikes generate increased revenues. As I pointed out, there was a massive study (actually cited first by Mata), which examined the ultimate effect of every tax hike and every tax cut since the 1960s or so. The tax hikes generated more money. The tax cuts reduced revenues and therefore increased debt.
On what basis can you possibly link the tech explosion of the 90s to Reagan’s tax cuts? Microsoft and Apple and Cisco and Intel would have curtailed their R&D in the absence of cuts to marginal tax rates? Show me any economic analysis which agrees with this. It’s all wishful thinking and speculation. What is real — absolutely real — are those graphs I linked in #77 and the data I cited earlier. 35 years of debt pay down by 7 different administrations, who raised taxes when they increased spending — for the Korean War and the Vietnam War and Medicare and the Great Society. Through recessions more serious than the (intentionally-inflicted) 1982 recession and the very typical, garden variety, business cycle recession of 2001. Korea and Vietnam being every bit as costly as Iraq and Afghanistan. Our debt got paid down, because we were responsible enough to pay our bills. It was only when supply side (“voodoo”) economics emerged as an economic theory that we tried to have our cake and eat it too — cut taxes and continue spending.
I think that the problem is that you are trying to argue two things at once. It would be better to isolate and separate two issues.
The first issue is big government versus little government. Tax and spend versus don’t spend and don’t tax. I have been very impressed by the both the passion and the well-reasoned clarity with which you argue in favor the latter and against the former. I’d like, at another time, to debate/discuss this particular topic, all by itself.
But what we are arguing about here is a very simple question. When you cut taxes do you ever recover the money which was lost to the treasury by virtue of the tax cuts? Realizing that all tax cuts since Reagan and up to and including the present have NOT been accompanied by spending cuts. And that the reality of these tax cuts has been the main driver of our accumulated debt, since 1981. You will argue that it was the spending which caused the debt and not the tax cuts. But this will be a disingenuous argument. We never had a problem with accumulating debt, in the entire 35 year post war period, despite massive spending programs, despite wars larger than Iraq and Afghanistan, and despite recession worse than those occurring in 1982 and 2001. That’s because, when we increased spending, we were sufficiently responsible to raise taxes, as well.
What is needed is simply a return to the tax levels of the 1990s, accompanied by spending cuts. I think that the recommendations of the debt commission were sensible, given the political climate, if not entirely ideal. For example, I wouldn’t wait until 2070 to get Social Security retirement age up to 70; I’d do it within the next few years. And I’d radically change the way that Medicare pays doctors and hospitals (outcomes, rather than procedures). I know that you hate both Social Security and Medicare, but the reality is that those programs are not going to go away and we do live in the real world. I think that defense needs deep cuts, as well. I’m in favor of more of a fortress America than “projecting” our military footprint across the globe. This would improve our national security and dramatically reduce the money that the government spends. I know (from your comments in #78), that you’d disagree with this, as well. Maybe we can debate differing visions of national defense at some other time.
@Hard: I’d really like to actually debate with you, as well. But name calling isn’t debate. It’s just name calling. If you want to make a specific point, please make it, and then we can discuss it and maybe argue about it. But I truly can’t respond to you until you actually try to offer some sort of specific comment about something.
– Larry Weisenthal/Huntington Beach, CA
openid.aol.com/runnswim
hi, please give johngalt the benefit of his knowledge, he has shown
many time that you cannot find a better expert then he is,
so why keep asking for more experts? what is your point there,
along with MATA’S EXPERTISES AND OTHER CONSEVATIVES
HERE, you have the best you can find any where in your liberal group,
they are repeating the same facts, we have to credit them for being so tolerant also,
and they have shown to be worthy of RESPECT FROM YOU AND YOUR DEMOCRATS ALLIED
WHO SHOW UP HERE TO CHALLENGE THEM, BYE
Okay… I’m going to try this one more time, and add another graph for you. In the mid 30s, the federal government started collecting from every US worker a piggy bank of taxes in Social Security. In 1965, they started collecting health insurance premiums from every US worker for an insurance plan they could not have until they were 65… provided they lived that long. And indeed, they set up the age with the expectation they could abscond the cash, but the majority of the population would *not* live that long. Joke’s on them… with the help of guys like you who are due diligent in attempting to cure cancer.
One twist in the details of reality is that it was in 1969 that LBJ started reporting deficits and debt differently, combining the financial data of all the federal trust funds with budget reporting, which was a clever way of masking actual debt and deficits. This was called on budget reporting. This illusionary practice continued until Reagan’s years, 1985, when it was taken off budget again. This makes the debt of those years somewhat skewed by the nature of the reporting.
Because these are… er, were… trust funds with a surplus… not as much aging populations to drive it in the red…. all were used to both buy US securitys (intragovernment holdings, which are debt) , as well as used as “loans” to fund other programs.
But time catches up to accounting tricks, and you can’t hide the drain on the trust funds that began under LBJ. It is this transition period, and prior, that you believe we were “paying down our debts”. What they were actually doing was collecting – in advance – from every worker for both ponzi schemes, racking up surpluses which was then borrowed against to effect that illusion of “paying down the debt”.
Fact is, for every IOU dollar in these trust funds is a dollar of debt that was not being disclosed. Social Security and other federal trust funds loan any surplus money to the federal government, and the federal government uses the money to pay off someone else it owes money to… ala the illusion of “paying down debts”.
Now look at the chart for when SS and Medicare started putting a drain on the spending, remember the money game of trust fund “surplus” transfers, and the fact that both Medicare and SS were in surplus in those days.
Here’s the link to your chart (which can be recreated on US Govt Spending as well)
Is it coincidence that the sleight of hand on budget reporting by Johnson started right about the same time that both SS pensions and Medicare started exploding in the mid to late 60s? (Medicare signed into law 1965) Prior to that, the feds had free use of the these trust fund surpluses, but the time came for the gravy train to come to a halt, and the piper needed to be paid.
Is it also coincidence that the fuzzy, mumbo jumbo practice of on budget reporting of the debt was eliminated under Reagan, so now we see a more accurate debt accounting?
You seem to think that debt under Reagan exploded, as compared to your favored Clinton. That is simply not true. Below is the years, the spending in Billions, and the spending to GDP% ( source data here)
1970 1038.3 31.00
1971 1126.8 31.49
1972 1237.9 31.36
1973 1382.3 29.78
1974 1499.5 30.23
1975 1637.7 33.62
1976 1824.6 34.00
1977 2030.1 32.91
1978 2293.8 32.02
1979 2562.2 31.58
1980 2788.1 33.72
1981 3126.8 33.64
1982 3253.2 36.25
1983 3534.6 36.31
1984 3930.9 34.44
1985 4217.5 35.48
1986 4460.1 35.71
1987 4736.4 35.09
1988 5100.4 34.73
1989 5482.1 34.94
1990 5800.5 36.01
1991 5992.1 37.22
1992 6342.3 37.04
1993 6667.4 36.31
1994 7085.2 35.38
1995 7414.7 35.54
1996 7838.5 34.69
1997 8332.4 33.77
1998 8793.5 33.24
1999 9353.5 32.65
2000 9951.5 32.56
2001 10286.2 33.38
Clinton debt ranged between 32.56 to 36.31% of the GDP in his terms. Reagan ranged between 33.64 to 36.31% starting off going up, then dropping in the latter part of his terms… same as Clinton. Hardly a huge difference.
Bush the younger ranged from a low of 33.38%, and ended with 36.94%.
Now if you want to see explosion of spending to GDP, we can take “the centrist’s” figures…. which are the guestimate of 39.97% in 2010 and 41.76%. That “guestimate” is optimistic…
@ mata: Thanks. Lots of grist for the mill. I’ve got a busy day at the office today, and it will take me some time to get back, but I’ll surely do so. This is one of the most genuinely productive discussions we’ve had, and I hope that you are finding it to be worthwhile, as well. – LW/HB
@johngalt:
I will say that you aren’t wasting your time as far as educating others. Larry will never see it your way no matter what proof you give him, tho.
Larry, did I call you any names in my last post? Like I said, you have a habit of ducking certain points, and I sated one of them in the last post as well.
No Larry… in all graphs and aspects, I refer to all as their proper terms… deficit for annual budget gap, and debt for overall debt, which should (but doesn’t always) include public debt, general govt spending AND the most often overlooked intragovernmental holdings… which is federal trust fund IOUs that are part of the debt.
In all graphs, it’s related to GDP percent. For example, you twice posted tax receipts is raw 2005 constant dollars, and no references to % of GDP.
Here’s Reagan’s tax receipts to GDP%
1981 3126.8 32.48 a
1982 3253.2 33.10 a
1983 3534.6 31.23 a
1984 3930.9 31.07 a
1985 4217.5 31.95 a
1986 4460.1 32.27 a
1987 4736.4 33.40 a
1988 5100.4 32.86 a
Here’s Clinton’s tax receipts to GDP%
1993 6667.4 33.39 a
1994 7085.2 33.51 a
1995 7414.7 34.27 a
1996 7838.5 34.85 a
1997 8332.4 35.40 a
1998 8793.5 36.25 a
1999 9353.5 35.83 a
2000 9951.5 36.93 a
But again, I have to point out the obvious. Reagan had a recession, high unemployment, and exploding Medicare/SS debts on top of it all. Reagan’s tax receipts/GDP swung 2.33% between his low and high. I hardly consider this “flat”. Nor was his spending to GDP that out of line either.
Clinton did not have a recession, had low unemployment, and only shared the exploding entitlement programs debt. Clinton’s swung 3.42%, with the dot com and onset of housing bubbles acting as the wind at his back.
@ hard
Firstly, it’s not just me who “wants to believe” that tax cuts lead to decreased revenue it’s the consensus opinion of conservative economists, as well. Second, revenue didn’t rise markedly during the 12 years of the Reagan tax cuts (see #60, comparing 1981 with 1993); it was relatively flat for a 12 year period, compared to the growth in previous and following higher tax administrations, and the rate of increase did not keep up with the growth in GDP and the rate and amount of increase was far lower than it would have been, absent the tax cuts, according to the analyses of all the economists who have studied the issue of the effect of tax cuts on revenues. I’ll discuss this further in my response to Mata (#83).
– Larry Weisenthal/Huntington Beach, CA
Almost, but not quite, Larry. Not all “tax cuts” have the same effect on the economy, and I happen to agree with the Heritage Foundation observation @in my above comment that there are exceptions to that more blanket statement you make. All, however, is still at the mercy of a fiscally responsible Congress, of which there hasn’t been one since the New Deal. And I define fiscally responsible as not spending more than you take in with tax revenues.
@Mata. Brief comment (I need to close my email program while I try to work — these debates are all too addictive), … since you refer above to your comments in #49.
Do you notice the effect of Reagan’s massive 1981 tax cuts on revenues (shown in BOTH original 1998 and updated 2006 analyses)? This one tax law change had the greatest revenue impact of all tax laws in the entire 38 year period (1968 to 2006) covered in the analysis you quote. And this single tax law (Reagan’s signature tax cuts) produced a permanent loss to the treasury of 2% of GDP per year, for just the first two years.
The economic impact of this law, translated to today’s GDP ($15 trillion) would mean a loss to the treasury of $300 billion per year, for the first two years alone! That was the most important reason for the doubling of the debt ratio over the next 12 years from about 32% of GDP to greater than 60% of GDP. And this isn’t changed by “dynamic scoring,” it must be added.
– Larry Weisenthal/Huntington Beach, CA
1001 giochi, I cannot see you here at FA, HOW DO YOU DO IT, MAGIC?
I just want to say welcome at FA
Larry, we have to go again back to “tax policy” and not individual “tax bills”. There are effective ways to combine cuts and increases.
Look, for example, at Clinton’s… since you hold him up as the proper way to go. Clinton increased taxes his first year – 1993. That year, the receipts % of GDP was 33.39. In 1996, he did the first of his two tax cut bills with the GOP Congress – the 2nd being in 1997.
Between his tax increase and the tax cuts, the receipts to % of GDP rose only 1.46%… and that’s giving you the benefit of the doubt of including 1996… the year of the first tax cut. If we average that out for four years (1993 up to, and including 1996), that’s .37% increase of receipts to % of GDP annually.
Between 1996 and 1997 – the year of the 2nd tax cut – the increase of receipts to GDP was .55% in that year alone…. dwarfing all prior year increases from the tax hike.
From 1997 – post the tax cuts – until the end of his term, the tax receipts rose 1.53% of the GDP… an average of .38% annually.
Considering the immediate effect of the tax cut year and ensuing years, and comparing to the performance of just hiking tax rates, I don’t think you have much of a case in Clinton’s record.
@mata: Thanks. back l8r. – LW/HB
P.S. I’ll have to save the heavy lifting stuff (your more recent charts and data) for tonight, when I’ll have some uninterrupted time), but it is important to note that the tax cuts of 1997 were capital gains reduction (big effect), child credit (small effect), and profit on sales of personal residence (small effect).
Now, the GOP claims that these tax cuts raised revenue, but this is based on the fact that, whenever there is a capital gains cut, there’s an artificial stimulus effect, from people taking capital gains which they’d been postponing in anticipation of the tax cut.
Why don’t we go back to that chart you posted in #49 and look at the tax bills — bill by bill? What you’ll find is that Reagan’s signature tax cut cost the treasury huge amounts of money; the Bush hike of 1990 and the Clinton hike of 1993 increased revenues, while the tax cut of 1997 “lost” money (albeit modestly) — even in the first two years, when the effect of encouraging the taking of capital gains was the strongest. What people tend to do (e.g. in the GOP analyses) is to simply look at raw revenue. So, in 1997 assets were appreciating rapidly — stocks, real estate, etc. — and then you have a capital gains cut, which encourages selling and then churning of investments. Plus, the GDP is increasing, which it always does. All this leads to increased tax receipts. So the GOP concludes — voila, the tax cuts generated new economic activity and thus, the tax cuts paid for themselves.
But when the experts actually go through the mathematical exercise of isolating the effects of the tax cut, per se, they find that (as you yourself quoted) tax policies really do have only minor effects (either way) on economic activity, so a tax cut produces a modest economic stimulus but this doesn’t — in the real world and not the theoretical world — compensate for the decreased revenue per dollar earned, owing to the tax cuts.
Anyway, I’m looking forward to going through your most recent charts and data.
LW/HB
@openid.aol.com/runnswim:
Like I said Larry, you are desperate to cling to your false belief that tax cuts don’t increase revenue and add to deficits. Not to mention that in your eyes letting Americans keep more of our money is somehow a bad thing. You’ve even said people need to pay their fair share (which folks like you decide) in relation to government benefits. Yet you try to claim the title of Conservative. It’s as sad as your track record of political predictions.
This is a hoot (and by hoot I mean load of BS):
You sure love to play the “appeal to authority” game. Too bad that doesn’t fly here. No, not all agree with what you just stated, in fact not even do most until you name primarily liberal economists. I’ve posted economists who disagree with you and them before, and you ignored those posts. Unsurprising, really.
Your arguments above to Mata are a great example of circular reasoning and spin. Like I said, you seem really in need of proving to yourself you are correct in your views. Then again, how else would folks like yourself justify forcing ever more socialism on people?
Larry, are you even capable of admitting that massive overspending is why we have a huge deficit and that tax cuts are a moot point as a result?
@openid.aol.com/runnswim:
I would state that you still are not taking all factors into consideration, regarding tax cuts, or hikes, and federal revenue vs. GDP, but I have not seen an actual study that does so. Your links I have seen, the graphs I have looked at, there just seems to be something missing from them. Mata has brought out much of what I’m talking about, and I have no wish to further involve myself within that particular discussion. I don’t have the knowledge to place charts within my posts or it might be easier to continue on with this discussion. One of the biggest factors I believe you are leaving out in your analysis is the periods immediately preceding a tax cut, and the relevant GDP growth rates, the revenues, and the revenue to GDP(as a percent). You discount too much the effect of stagnant, or recessing economies, prior to those tax cuts. Just a thought. I’ll leave that for Mata to go into more.
I didn’t link the tech boom itself to Reagan’s tax cuts. I linked the magnitude of it. The details are too involved for me to get into now, but even Krugman, back in January, has implied the same, regarding the boom of the 90’s.
I’ve told Greg before that arguing numbers means absolutely nothing until the philosophical differences can be reconciled, which is why I come at this issue philosophically more than anything else. In my belief, with a smaller, Constitutionally limited government, the tax rates would be lower than they are right now, so arguing for higher rates is pointless, even if one assumes your assertions correct. And the simple fact that this government is predisposed to spending more than it takes in, whatever the tax rates, makes the philosophical question of big vs. small more important than placing numbers on a tax schedule.
And I don’t necessarily argue for “don’t spend and don’t tax”, as that would be just as contrary to the Constitution as “tax and spend”. No, I argue to Constitutional spending, meaning only spending on that which is listed within Article I, Section 8, without the expansion of powers assumed by Congress and the President since the New Deal. However, I’m going to surprise you with the next;
I don’t hate them, I just think that they had no place being instituted in the first place. BUT, too many people depend on them, based on the falsehoods put forth at their institution, and to take them away completely would not be just. They do, however, need a lot of help, and not simply a continuing infusion of money, which is what the liberals seem to believe about them. I don’t claim to know much at all about medicare, so I won’t comment on what to do with it.
Believe it or not, I agree with you on this. We probably disagree on particulars, such as revamping the procurement programs for the military, but not on the essence of less defense spending. Your view is very similar to Ron Paul’s ( and no, I don’t support him). I see a military able to go to other places to kick a** when necessary, but not preemptive. I see a Navy big enough to maintain a presence in the world’s oceans, to protect our country’s rights to traverse them. What I see is the vision of the founding fathers, in regards to defense, which sounds similar to yours. Probably not much of a debate between us on this.
Anyway, without the philosophical question answered, my belief is that you are simply arguing about how fast to let a patient bleed out, instead of whether or not to save the patient.
Larry, let me put it this way.
1) Your argument is a massive oversimplification of the issue.
2) People making different levels of income react/benefit differently to tax cuts
3) Money the government does not take in due to tax cuts IS NOT A LOSS OF REVENUE.
4) The national debt is due to monstorous overspending making the argument against tax cuts pointless
5) Projected tax revenue isn’t based on facts and is usually exaggerated.
5a) When said projected revenue is not reached due to tax cuts, IT IS NOT A LOSS.
6) It is not your place to tell me I need to sacrifice just to gratify your ego
7) YOU can cut the government a check if you want.
8.) Dynamic scoring is a sick joke favored by those pushing tax increases
@Hard (#95): Thanks for the specific comments, to which I can respond. I’ve been allowing this thread to lie fallow for a few days (prior commitments and then preoccupation with Bin Laden). I’ll reply to your #95 at the same time I reply to John’s #94 and Mata’s #83 and 86 (sometimes I feel like one of those guys who’s simultaneously playing chess with a half-dozen others).
– Larry W/HB
Did anyone notice that the extension of the BUSH tax cuts (that Obama only reluctantly agreed to) have led to MORE tax revenues than the Obama Administration expected????
Extra Tax Revenue to Delay Debt Crisis
New York Times –
WASHINGTON — A greater-than-expected increase in tax revenue has extended by about a month, until early August, the federal government’s ability to pay its bills without an increase in the debt ceiling, the Treasury Department …
Added tax revenues to delay debt crisis Marketplace
Geithner Extends Debt-Ceiling Deadline to August Bloomberg
US pushes back day of reckoning on debt limit Reuters
OzarksFirst.com – AirForce
$150 BILLION more came in than expected!!!!
Obama dragged, kicking and screaming, into doing what Bush did.
And, again, it worked!
Obama should wear a bracelet that reads: WWGWBD?
Meaning: What Would George W. Bush Do?
openid.aol.com/runnswim,hi, you must admit that you enjoy playing chest with
all the group at once,
@nab g
Obama did nothing to reduce taxes and that was totally expected, only fools would hope for better. He didn’t win by some miracle, there is a corporate lobby supporting him, he’s nothing more than a puppet.