I've got a simple question...

[Yonivore]

Why are the Democrats harping about tax cuts when 1) Everyone received a tax cut and 2) they've, once again, resulted in increased federal tax revenues?

Seriously, why are you harping on the tax cut for the richest 1% if, in the end, the tax policy dramatically increased revenue and NO ONE paid a higher effective tax rate than they did the year before?

I still don't get it...

I understand the harping on spending... , I'm with ya! But, c'mon, tax cuts have worked every time they've been tried....

[Nbadan]

Yes, almost everybody got a cut, but the rich got a much larger cut than the not-so-rich and most of the poor received nothing at all.

The prevailing feeling among Democratic circles is that the tax-cut was unneccesary. Clinton had numerous consecutive years of economic expansion with a much higher tax rate, the tax-cut, if extended, will lead to years of record deficits which sooner rather than later will mean higher taxes for everyone. There was a lot of money sitting around in M2 form after the tech bubble burst, so many question the wisdom of giving the rich even more money that could have gone to the war in Iraq, higher gas prices, and now hurricane Katrina relief.

A tax-cut without concurrent spending-cuts is really just a tax-deferment.

[Neuromancer]

Yeah, basically. We all got a tax cut, but the state as a whole, is going more downhill economically.

[boutons]

"Everyone received a tax cut"

The first big action of the in 2001 was to ram through tax cuts that were the most unfair (top got big, middle/bottom got little) in decades.

"resulted in increased federal tax revenues?"

simply not true. The increase in corporate tax revenues last spring, lied about by the Repubs to be from economic growth, but was really from the expiration of earlier Repug temporary corporate tax cuts.





"tax policy dramatically increased revenue"

It hasn't. You're lying. Show the non-Repug facts to prove you aren't lying. For a couple years now, the monthly financial news has been aboutt he federal defecit increasing from record to record level. If tax policy (cut taxes for the rich and corps) has increased revenue, then the federal defecit would not be ballooning at record levels. A huge portion of the multi-$T defecit of the next decade is due to dubya's tax cuts (the largest portion are for top 2% and corps), NOT due to Iraq (or not Katrina).

Househould _earned_ income has been essentially flat for 4 years. That's why even with low, 2% inflation, people are not feeling better off with dubya's economy since they really aren't better off. Even the White House figures show this:

http://www.whitehouse.gov/fsbr/income.html

========================================

A Price To Be Paid For Folly

By David S. Broder

In the wake of Hurricane Katrina, credible private experts are forecasting a federal budget deficit of $500 billion for this year, a sharp reminder of the government's fiscal folly.

For all the deserved criticism the Bush administration has received for its y and ragged response to the storm's ravages on New Orleans and the Gulf Coast, the long-term costs to the nation of the reckless disregard both the president and Congress have shown toward paying the nation's bills may be even greater.

In time those forced from their homes in Louisiana and Mississippi will be returned, and a degree of order will be restored to their communities. Business will recover. Mardi Gras will again be celebrated in the French Quarter. But our children and grandchildren will pay a continuing price for the refusal of our leaders to face the reality of an out-of-control budget.

The scale of the failure is measured by a set of numbers that Rep. John Spratt of South Carolina, the senior Democrat on the House Budget Committee, carries with him. They chart the annual increases passed by Congress in the national debt limit. In 2002 it was $450 billion; in 2003, $984 billion; in 2004, $800 billion; and this year, the House has passed an increase of another $781 billion, on which the Senate has yet to act. That totals a stunning $3 trillion in additional debt in four years -- a 50 percent increase in the ulative debt from all of America's previous history.

When you look at that record, the self-congratulatory tone of the Republicans who have been running Washington seems absurdly unjustified. In July, when the White House Office of Management and Budget said the deficit for this year would decline to $333 billion from $412 billion in 2004, President Bush said, "It's a sign that our economy is strong, and it's a sign that our tax relief plan, our pro-growth policies are working."

In August, when the Congressional Budget Office lowered the deficit forecast to $331 billion, Republican Rep. Jim Nussle of Iowa, the chairman of the House Budget Committee, said, "We're clearly on the right track. The strong economy, higher revenues and falling deficit projections are all results of the successful leadership and policies of the Congress and the president."

These judgments were faulty at the time. They made no provision for the continuing costs of the war in Iraq, or for the Republican plan to end the estate tax and make all the previous Bush tax cuts permanent. And, most of all, they did not realistically calculate the costs of the new Medicare prescription drug benefit and the looming obligations to the millions of baby boomers who are nearing retirement age.

Now those pre-Katrina estimates have been rendered even more ridiculous. In the first 10 days since the storm hit, the president asked Congress for emergency appropriations of $62 billion -- and the bills are just starting to come in.

The question is whether this will force the president and congressional Republicans to suspend their obsessive drive to reduce the revenue base of the federal government, or whether they will finally start paying the bills their government is incurring.

It is hard to be optimistic on that score. This president may not literally be incapable of reversing directions, but we have yet to see him do that on any significant matter. Treasury Secretary John Snow reportedly told congressional Republicans in a closed meeting that Katrina strengthens the case for making the Bush tax cuts permanent. Some Republicans in Congress are appalled at the fiscal wreckage, but the leadership on Capitol Hill has yet to assert its cons utional power of the purse or do anything but increase the damage by cutting taxes while simultaneously boosting spending.

The warning signs of impending economic calamity are every bit as evident as the forecasts of ruin for New Orleans when a major hurricane hit.

The runaway budget deficits are compounded by the persistent and growing imbalance in our trade accounts -- jeopardizing the inflow of foreign funds we have used to finance our debt.

At a private dinner the other evening where many of the men and women who have steered economic and fiscal policy during the past two decades were expressing their alarm about this situation, one speaker summarized the feelings of the group:

"I think it's 1925," he said, "and we're headed for 1929."

[email protected]





==========================================

July 11, 2005


Un-Spin the Budget

By PAUL KRUGMAN

Later this week the White House budget director plans to put on an aviator costume, march up to a microphone and declare Mission Accomplished in the war on deficits. O.K., I'm not sure about the costume bit.

Seriously, the administration is poised to do the same thing on the budget that it has done again and again in Iraq: claim that a modest, probably temporary lull in the flow of bad news shows that victory is around the corner and that its policies have been vindicated.

So let me do some pre-emptive de-spinning and debunking.

To understand where the budget deficit came from, you can't do better than the Jan. 18, 2001, issue of the satirical newspaper The Onion, which predicted the future with eerie precision. "We must squander our nation's hard-won budget surplus on tax breaks for the wealthiest 15 percent," the magazine's spoof had the president-elect declare. "And, on the foreign front, we must find an enemy and defeat it."

And so it has turned out. President Bush has presided over the transformation of a budget surplus into a large deficit, which threatens the government's long-run solvency. The principal cause of that reversal was Mr. Bush's unprecedented decision to cut taxes, especially on the wealthiest Americans, while taking the nation into an expensive war.

Where's the good news? Well, for the past four years actual tax receipts have consistently come in below expectations, so that the deficit is even bigger than one might have predicted given the administration's don't-tax-but-spend-anyway policies. Recent tax numbers, however, finally offer a positive surprise. The Congressional Budget Office suggests in its latest monthly budget review that the deficit in fiscal 2005 will be "significantly less than $350 billion, perhaps below $325 billion." Last year the deficit was $412 billion.

The usual suspects on the right are already declaring victory over the deficit, and proclaiming vindication for the Laffer Curve - the claim that tax cuts pay for themselves, because they have such a miraculous effect on the economy that revenue actually goes up.

But the fact is that revenue remains far lower than anyone would have predicted before the tax cuts began. In January 2001 the budget office forecast revenues of $2.57 trillion in fiscal 2005. Even with the recent increase in receipts, the actual number will be at least $400 billion less.

And nonpartisan budget experts, such as Ed McKelvey of Goldman Sachs, believe that even the limited good news on the budget is a temporary blip, not a turning point. Douglas Holtz-Eakin, the director of the Congressional Budget Office, warns us to take the new revenue figures with a "grain of salt," and declares that "if you take yourself to 2008, 2009 or 2010, that vision is the same today as it was two months ago."

A close look at the tax data explains why these experts believe that we're seeing a temporary uptick in revenues, not a sustained change in the trend. Taxes that are closely tied to the number of jobs and the average wage, such as payroll taxes and income taxes automatically withheld from paychecks, aren't showing any big pickup. This confirms other data showing that the economy as a whole is, if anything, doing worse than one would expect at this stage of an economic recovery.

It turns out that all of the upside surprise in tax receipts is coming from two sources. One is tax payments from corporations, up both because last year corporate profits grew much more rapidly than the rest of the economy and because the effective tax rate on corporations went up when a temporary tax break, introduced in 2002, expired. Both are one-time events

The other source of increased revenue is nonwithheld income taxes - taxes that aren't deducted from paychecks but are instead paid by people receiving additional, nonsalary income. The bounce in nonwithheld taxes probably reflects mainly capital gains on stocks and real estate, together with bonuses paid in the finance and real estate industries. Again, this revenue boost looks like a temporary blip driven by rising stocks and the housing bubble.

In other words, we're still deep in the fiscal quagmire, with federal revenues far below what's needed to pay for federal programs. And we won't get out of that quagmire until a future president admits that the Bush tax cuts were a mistake, and must be reversed.

E-mail: [email protected]

[SpursWoman]

"Rich" people get a bigger apparant tax cut because they pay a -load more than lower income people to begin with. So OF COURSE if there's a tax cut it's going to look like they got a better deal.

Yes, I think we should give lower income families thousands and thousands of dollars of tax credits when they don't pay even close to that to begin with. Oh wait, we do...the earned income credit, child care credit, dependent credit, etc.

[SpursWoman]

But you're right, though. The tax system isn't fair. I think it's a horrible crime that people who've gone out and gotten an education...have shown motivation and perseverance to be successful....opened their own businesses and gone on to give others a job should be penalized at a whopping 38%, when those that...ummm.....haven't....only have to pay 10%.

They should just make it 10% across the board. And the *richer* people will still be paying significantly more.

[JohnnyMarzetti]

Those who pay the highest in taxes make the most money so they don't about it. Bill Gates doesn't and he's a democrat.

And those with an "eductation" know the tax loop holes and do just fine so stop crying a river.

[SpursWoman]

Those who pay the highest in taxes make the most money so they don't about it. Bill Gates doesn't and he's a democrat.

And those with an "eductation" know the tax loop holes and do just fine so stop crying a river.

You think everyone that's in the higher tax brackets make Bill Gates kind of money....and you're privy to his meetings with his accountants?

[travis2]

You think everyone that's in the higher tax brackets make Bill Gates kind of money....and you're privy to his meetings with his accountants?

You should know by now not to confuse his small mind with trivialities like factual information...

[Marcus Bryant]

The primary problem is the growth in federal spending. Tax receipts are simply a source of financing for that spending. You can reduce marginal rates to create a more attractive environment for investment and enterprise, but if you continue to boost spending levels then the pressure will exist for those rates to be increased back to their pre-cut levels.

The last 5 years have been extremely disappointing from a fiscal POV, especially for a GOP presidency combined with near total GOP control of the Congress. Don't blame the war or the Katrina give-out fest, from the beginning it was clear a GOP Congress could not put principle before giving a popular presidency in their own party whatever he wanted. And what he wanted was re-election. How does a sitting president improve his chances of being re-elected? Spend, spend, spend, spend.....

[Yonivore]

The primary problem is the growth in federal spending. Tax receipts are simply a source of financing for that spending. You can reduce marginal rates to create a more attractive environment for investment and enterprise, but if you continue to boost spending levels then the pressure will exist for those rates to be increased back to their pre-cut levels.

The last 5 years have been extremely disappointing from a fiscal POV, especially for a GOP presidency combined with near total GOP control of the Congress. Don't blame the war or the Katrina give-out fest, from the beginning it was clear a GOP Congress could not put principle before giving a popular presidency in their own party whatever he wanted. And what he wanted was re-election. How does a sitting president improve his chances of being re-elected? Spend, spend, spend, spend.....

I don't disagree. However, why aren't the calls for spending reductions as loud (from the Left) as are calls for raising taxes on the rich?

As for me, I'm in favor of the Fair Tax Plan and it's gaining steam. But, our problems have never been a result of tax policy except when the rates are too high. Lower rates have always, I repeat, ALWAYS resulted in increased federal revenue...it's the pigs at the trough that can't seem to sock that windfall away -- And, yes, Republicans and Democrats alike.

[Marcus Bryant]

Well, the GOP used to be the party of reducing (or at least slowing down the rate of growth in) federal spending.

If you think about it, both major parties have popular and unpopular fiscal roles historically. The GOP is the party of tax rate cuts (popular) and spending cuts (unpopular).

The Demos are the party of spending increases (popular) and tax rate raises (unpopular).

It is apparent that GOP congressmen lose all sense of fiscal for ude when a GOP president is in the White House. I'd wager that if it was a President Gore or Kerry that the Congress wouldn't be so amenable to the rate of spending growth that the White House has pushed for over the last 5 years.

From a fiscal sanity standpoint, the best WH-Congressional combo appears to be a Demo president and a GOP Congress.

[Yonivore]

Well, the GOP used to be the party of reducing (or at least slowing down the rate of growth in) federal spending.

If you think about it, both major parties have popular and unpopular fiscal roles historically. The GOP is the party of tax rate cuts (popular) and spending cuts (unpopular).

That seems to be an apples and oranges comparison. As for me, both are popular.

The Demos are the party of spending increases (popular) and tax rate raises (unpopular).

Ditto. Both are unpopular with me.

It is apparent that GOP congressmen lose all sense of fiscal for ude when a GOP president is in the White House. I'd wager that if it was a President Gore or Kerry that the Congress wouldn't be so amenable to the rate of spending growth that the White House has pushed for over the last 5 years.

From a fiscal sanity standpoint, the best WH-Congressional combo appears to be a Demo president and a GOP Congress.

Maybe so but, the last two Democratic Presidents were disasters...

Carter nearly bankrupted the country (granted, he had a Democratic Congress to deal with) and Clinton sold us out to Red China and ignored Islamo-fascism.

[Marcus Bryant]

Clinton also had a GOP controlled Congress on his ass about spending increases. With a Demo prez in the White House, GOP congressmen seem able to recall their basic fiscal philosophy.

Granted, Clinton was much more amenable to selling out his supporters for political gain than the average Demo politician, but the president's budgetary influence can be significantly weakened with an emboldened Congress.

What we have now are two parties with the same basic fiscal philosophy: spend, spend, and spend again. The only difference is that one party offers you a liberal, urbane and predominantly agnostic social view while the other party offers a more conservative, rural and strongly religious social view.

When a GOP president introduces and pushes through with the assistance of a GOP controlled Congress the largest expansion ever in Medicare since its creation, well, we can dispense with the notion that there is any meaningful difference between the two parties on fiscal matters.

But it's understandable how this has happened. If you like to think in stereotypes, the Demos have become the party of the very poor, the old and, well, yuppies. Either you believe the government should pay for everything or you can afford to pay your share comfortably, so long as your government allows lesbian couples to abort their fetuses so that they don't become kids who have to say the pledge of allegiance in a public school. The GOP has become the party of the surburban middle class (low, mid and upper) and rural America. Not a small part of that base is used to federal spending largesse. As long as you adopt a Southern fried down home tone then you can spend however much you want.

'em both.

[boutons]

[cherylsteele]

Tax cut???
Tell that FICA character to ease up on my paycheck.

[Shelly]

Tax cut???
Tell that FICA character to ease up on my paycheck.

It will when you reach $90,000--Medicare keeps on going and going...the bas !