"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.
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"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
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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 tardy 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 cumulative 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 constitutional 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."
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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.
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