Since 2001 President Bush and congressional leaders have promised that enacting each of a series of tax cuts would strengthen the economy by bringing faster growth, more jobs, and greater investment. With Congress again debating whether to extend past tax cuts and enact new ones, it's time to review how much the last four years of tax cuts have affected the U.S. economy and budget outlook. Unfortunately for most Americans, the tax cuts since 2001 have not made today's economy stronger. Over the last five fiscal years, the tax cuts have had a direct cost of $860 billion and (with interest costs) a total effect on the deficit of $929 billion.1 By creating excessive permanent deficits, they have lowered our future standard of living.
...
The fact that all major economic indicators are higher today than in early 2001 does not mean that the tax cuts have been beneficial. Since the Great Depression, the resilient U.S. economy has always had gains over such four-year periods. The appropriate question to ask is: How well has the economy performed compared to similar periods in the past? If the last four years of tax cuts had worked as promised, the economy should have done better than in previous cycles, when taxes were either not cut or cut much less.
By virtually every measure, the economy has performed worse in this business cycle than was typical of past ones, including that of the early 1990s, which saw major tax increases. The single area that has excelled in the current cycle, housing, has actually done so despite reduced tax incentives since 2001. And the tax cuts certainly didn't boost investment levels: the expiration of over $60 billion a year in business tax cuts at the end of 2004 had virtually no observable negative effect on investment.
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So all we have to show is tax increases on our kids. Great.
As long as my friend's rich parents got to take an extra trip to Lake Tahoe last summer, those tax cuts seem to be workin just fine to me.
^ problem is Random, is that the tax cuts raised more govt revenue. THe only reason we have those deficits, is because we have not trimmed the budget. We've only fattened it. You see you liberals always try to disprove the strenght of the economy by pointing out Govt deficit.(Always the same tactics used to discredit reagonomics) Sorry to hurt your whole premise, but the economy is measured on the private sector's productivity like the GDP AND GNP.
The taxcuts were sold on the premise that they would take us out of the recession, not that they would balance the budget. Now you could say that expanding the govt w/o cuts is the main perpetrator.
Home ownership is way up. For minorities too. Computers are faster in general. Appliances better. Life is good right now. And considering the economy is still hot after 9/11 2 war campaigns and a lot of natural damage at home and abroad..
Yea . Bush is kicking ass and taking names...
Problem is, as a group we aren't making more than we were in 2001, as real wages have remained stagnant and in some years even decreased.
Home ownership and the coastal housing bubble aren't part of what is driving the current economic expansion, it is what is driving the Bush economy and that's about to end. Home prices in parts of the country not affected by refugees of the 05 Hurricane season are actually starting to deflate. This comes at a bad time as consumers who were banking on paying for all the expensive gas they have been piling up on credit cards through the summer is now coming due and there is less and less equity in their homes for owners to borrow from.
I believe we are going into a deflationary period because many consumers are simply stretched to thin thanks to increases in minimal credit card payments, the price of gasoline, and soon many home investors are gonna get a reality check about investing in speculative real estate.
i'll take lame post from elpimpo with images and pictures than unrational re ed counter arguments any day.
And guess why homeownership is up. Because peoples' money are in their pocket from all across the spectrum. Instead of paying for a pork barrel project like a dung musuem of art or funding NPR, taxpayers are taking advantage of low interest rates and extra cash to spend.
Very amusing. The average earner received $300 from W's tax cuts. That's hardly enough to invest in a new T.V. much less a new home. Non-discretionary spending, that's spending not on the war or hurricanes has gone up at record pace under the current administration. Taxpayers are taking advantage of lower interest rates to over-spend - average household credit debt has jumped to $7000. In the face of the unexplainable continuous rise in interest rates by the feds, that's a tragedy waiting to implode. This is why the new industry-written, bankruptcy laws were rushed into law.
There are a few things wrong with this, so I will try to itemize them for readability.
1) Budget deficits by themselves don't mean much. Remember that a deficit is different than the overall debt. deficit+deficit+deficit+deficit=overall debt
2) Deficits that are less (in percentage terms) than the overall growth rate of the economy are not necessarily bad things. If the budget deficit for any given year is only 1%, and the economy is growing by 3%, your overall debt is not growing as fast as the economy as a whole.
3) Let's stick some concrete numbers to show why your assertion doesn't really hold up to the way things really work.
Given:
Economy=1000
Tax rate of 10%=100
Now, let's say we decide to lower our tax rate to stimulate the economy. We lower our tax rate to 9% (this is a cut of 10% of our revenues, 10-1=9, 1/10=10%)
Question:
How much would the economy have to grow to keep revenues at 100?
Simple algebra gets us there.
x*.09=100, where x=size of new economy, .09 is our new tax rate, and 100 is the desired level of fund for government. Solve for x, and you get x=100/.09, or x=1111
So for this "solution" to growing the economy to work, a 10% tax cut would have have to create an 11% increase in the economy.
Since the private sector is where wealth is created, this should be easy to accomplish, right?
Now let's add a couple of factors and muddy things a bit.
Is that why the economy is up 3.8 GDP?
Get the out of here ... Bush kicking ass in the face of adversion... hahah..
Continuing from there, let's pretend that we didn't cut government spending.
Given:
The above situation and:
We borrowed the 10 that we cut out of the governments revenue.
As the economy grows, so does the need for government. More business=more streets, more bridges, more airplanes, more weigh stations for trucks, more tax collectors, more building inspectors, more Securities and Exchange Commission agents, more State Auditors, etc.
Let's assume that the demand for government is a direct ratio, say, 10 out of every 100, or 10%.
Question:
How much government will an economy the size of $1111 need?
That much is easy. 1111*0.1= 111
But remember, our current revenue stream is only .09%, so we are only making 100.
We need to get the extra money from somewhere. Let's say we don't like to raise taxes, so we borrow that extra $11.
Our overall debt is now $21.
Anybody see a problem?
You have to pay interest on that $21. This is generally about the same rate as the growth of the economy.
So now the requirement for government revenue is NOT $111, it is 111+(21*.1) or 111+2=113.
OOPS.
Since we don't like to raise taxes, let's borrow that money too.
Our fictional government has built up a total debt of $23 in two years AND raised the amount of money it will have to take out of the more productive economy.
So our requirement for government is actually growing FASTER than the economy is, because we have to make those debt interest payments somehow, AND we have to pay those deficits when the bonds mature.
What I think is happeing is that Reagans debt is coming back to bite us in the ass.
THAT is why our economy now isn't growing as fast as it has in past recoveries.
We have to tax more NOW because Reagan's irresponsible budgets got us into debt we have to pay off, this taking of extra money out of the economy is putting a drag on it.
What will happen in the future as we have to pay on Reagan AND Bush's studipity?
Your whole premise that the economy will grow faster falls apart when you consider the DEBT INTEREST payments. For your magic to work, you have to have an economy that is growing faster than the overall debt, right?
if the economy is growing faster than the debt, the debt as a percentage of the economy should be shrinking.
NOW FOR THE MILLION DOLLAR QUESTION:
Is the debt as a percentage of the overall economy shrinking?
Nope.
Here's a question for you:
What happens to those interest payments when interest rates go up?
Last edited by RandomGuy; 10-29-2005 at 10:19 AM.
um, "adversion" isn't a word. Perhaps you meant "adversity"?
Right....we should trust random guys word over the Economic Policy Ins ute, becuase after all a random guy on the street is more likely to know his then a think tank designed to make proper anylasis of the economy and it progression? Dude people can try to rationalize their way into justifing reganomics and all the Bush tax cuts forever, the problem is that you have to turn your head and cover your ears everytime actuall economists tell you your damn theory is wrong, you have to ignore the fact that every time there has been a republican regime attempting to use the trickle down effect, there has been a recession (see regan, bush, and bush) and we never experience real growth ( i.e. growth in real wages and the standard of living for the average american)
um, I actually agree with EPI, and think "reaganomics" is a disaster waiting to happen.
I was using EPI's article as support for this assertion.
That's right. Poor people are obviously poor because they CHOOSE to be poor. I mean, there couldn't *possibly* be any other explanation.
THey way you put it makes it seem that the govt sans disaster and war, grows at an exponential rate that neither taxe increases or decreases would make a difference. you then go on and try to win the argument with saying that reagonomics is a disaster becuase of such irrational point.
Once again you are plainly misguided.
1. You dont measure the economy on govt debt and the workers, you measure it on the output of the whole market.
2.you tried to then prove your poin that govt is always increasing by pointing things out like street signs and municipal ordeals. Problem is that the state, fed, and local govt's split the cost.
3.IT is even stupid to suggest that trimming the budget wouldnt decrease the deficit. If tax cuts have proven to raise revenue, then if you cut govt spending you will have a surplus. Since tax cuts actually raised revenue then that means that they are doing their job. WHat bush and reagan failed to do is cut govt spending. Now Clinton did that with cutting the military drastically. Both Reagan and Bush had wartime presidencies, so cutting any military spending would be stupid on their part. But if they were to cut social spending then you would trim the deficit and have a surplus. Now if any republican cut social spending, the media and democrats would say that the repubs are throwing the elderly outside the streets. The republicans had tried cutting failed social programs or decrease their growth, what then happened in the 80's was that the media and dnc went out and told the public that the republicans were gonna make everyone homeless.
4.Your right that the debt is a looming problem. But what we can do is try to eliminate govt spending, something you totally abhor. Tax cuts do not create deficits. Increasing govt spending does.
Your logic is simply this: THe act of giving one more money back into their hands, only gets them into debt.
you see. It was not more cash that made jim bob go broke, but lack of fiscal restraint that did him in. IF jim bob decided to take that cash and invested and cut his spending then that would have been a different story. But thats not what jim bob did. Jim Bob (bush, repubs and dems) recieved more money and then turned around and spent more of it.
Last edited by gtownspur; 10-29-2005 at 01:39 PM.
Its all so stupid to assume that poor people came about because of republican administration.
Poor people are poor 80% of the time because they cannot personaly handle fiscal restraint. Lottery winners have proven this exact theory. they win 20 mil one day, and then 5 yrs later theyre worse off than when they were poor.
(sets aside his frustration and takes a deep breath.)
NO. That is not what I am saying. Please read the above couple of posts again.
Spending increases paid for with debt are very bad.
They force government to either borrow more in the future or raise taxes. There is a limit to how much ANY government can borrow, and once you reach that point you get a nasty economic shock.
Please don't lecture me on my ability to grasp economics issues. I am studing for a masters of accountancy, and have gotten A's in every economics and finance course I have ever taken. I love this stuff, and know more than you do, honest.Once again you are plainly misguided.
(puzzled) Are you trying to say that GDP is a measure of economic activity? If so, then yes.1. You dont measure the economy on govt debt and the workers, you measure it on the output of the whole market.
If we paid fewer taxes, would we have more economic activity? Yes, to a point. How low would our taxes be if we didn't have to pay interest on the national debt?
Yup. If you think the federal government is wasteful, get rid of it and try duplicating its functions 50 times, once for each state. Could you imagine the chaos at airports from 50 versions of the FAA?2.you tried to then prove your poin that govt is always increasing by pointing things out like street signs and municipal ordeals. Problem is that the state, fed, and local govt's split the cost.
(puzzled) Trimming the budget would decrease the deficit, if accompanied by stable tax rates, and I didn't say otherwise. Please actually take the time to read my posts.3.IT is even stupid to suggest that trimming the budget wouldnt decrease the deficit. If tax cuts have proven to raise revenue, then if you cut govt spending you will have a surplus.Since tax cuts actually raised revenue then that means that they are doing their job.
I am all for holding spending flat across the board for a few years to pay down the debt. This will suck on a lot of levels for a lot of people, but a temporary sacrifice for greater growth in the future is needed, in my opinion. "Clinton this, Bush that" is pointless to what needs to happen in the future.What bush and reagan failed to do is cut govt spending. Now Clinton did that with cutting the military drastically. Both Reagan and Bush had wartime presidencies, so cutting any military spending would be stupid on their part. But if they were to cut social spending then you would trim the deficit and have a surplus. Now if any republican cut social spending, the media and democrats would say that the repubs are throwing the elderly outside the streets. The republicans had tried cutting failed social programs or decrease their growth, what then happened in the 80's was that the media and dnc went out and told the public that the republicans were gonna make everyone homeless.
.4.Your right that the debt is a looming problem. But what we can do is try to eliminate govt spending, something you totally abhor. Tax cuts do not create deficits. Increasing govt spending does
Factually wrong. Spending more than you take in creates deficits.
If you keep spending perfectly flat (a real decrease in spending) AND cut taxes at the same time, you have a deficit.
That is not what I said, please re-read it until you actually understand it, if you read it through the first time.Your logic is simply this: THe act of giving one more money back into their hands, only gets them into debt.
Clinton and the GOP controled house of reps actually managed to pay down the debt in proportion to the overall economy. If Bush and the GOP controlled House and Senate had done the same this presidency we could PERMANENTLY REDUCE the federal budget.you see. It was not more cash that made jim bob go broke, but lack of fiscal restraint that did him in. IF jim bob decided to take that cash and invested and cut his spending then that would have been a different story. But thats not what jim bob did. Jim Bob (bush, repubs and dems) recieved more money and then turned around and spent more of it.
What our one-party government has done is to TEMPORARILY reduce tax rates. Eventually we will get sick of Republican mismanagement of the economy, and give the government back to the Dems for a shot at trying to fix the problem. What will the Democrats have to do to fix it? RAISE TAXES to pay for the interest on the decades of built-up debt.
In the end there is no-one to blame BUT the Republicans because they will have controlled the Executive and Legislative branches of the federal government for 8 years and run up so much debt we will ahve to pay them back.
Random, You can be ing the king of economics all you want, and if thats the case i should just take you as a source since i cant even dispute with you. screw your goddamn accounting profession. Just cause your studying economics does not give you the cheap shot benefit of name dropping your study to shut the anyone up. If there wasnt others who disagreed with your analysis of tax cuts in your field, then by all means i will quit posting my conclusions and give you the benefit of the doubt. Look, i'm not even disputing your data. I just have a problem with your use of it to reach a conclusion that tax cuts do not help an economy. Not just me dissenting, but i dare you to bet the house that everyone in your type of field agrees with your way.
You could know all the nuances of the economy and still be blind to the real problem of our govt deficits and spending. There are medical doctors who could have your whole patient history and all the results of your screening. They could have labored and study in the finest ins utions but many a times they have had misdiagnosis because of relying on their systems of thinking more than their God given reason.
my point is you may be Dr. Economics but you totaly have misread your winded data and misdiagnosed the problem.
I mean look at your own damn post. It suggest that tax cuts have not done anything to boost the national economy. The one reason you bring this up, is because we have record deficits. And your facts you used to prove that tax cuts did not boost production were not based on disproving tax cuts efficacy at all, or the fact that it did or not boost production. You wasted your hot air on pulling an imaginary number out of your head on GOvt expansion of already existing ins utions and thus telling us that the tax cuts have to make up a bloated percentage of that growth to balance it all out. you did not even give us a source to back up your assertion on the rate of govt growth. You just thought that if you were the lone accounting major on this forum then we'd take your word.
Don't hate me already. You have a point about the deficit. But economic analysist have been saying that we have a great economy, but that if we dont reduce the debt we will suffer later on. You on the other hand are saying something totally different. That we have a fake boom with no growth(when we dont. Look at the GdP), we have no increase in revenues(we do).
(sighs) Alright, this is where I stop being halfway nice.
For the 4th-10th times:
Tax cuts DO provide a boost to the economy.
Tax cuts DO provide a boost to the economy.
Tax cuts DO provide a boost to the economy.
Tax cuts DO provide a boost to the economy.
Tax cuts DO provide a boost to the economy.
Tax cuts DO provide a boost to the economy.
Tax cuts DO provide a boost to the economy.
BUT
Since federal spending has gone UP and taxes have gone DOWN, that means that the government has had to borrow A LOT to pay for the spending.
SO:
Borrowing too much is bad.
Borrowing too much is bad.
Borrowing too much is bad.
Borrowing too much is bad.
Borrowing too much is bad.
Borrowing too much is bad.
Borrowing too much is bad.
Hopefully somewhere in there, you finally pick up on what I am trying to say.
And that doctor's chances of being right are 20 times the chances that yours are.You could know all the nuances of the economy and still be blind to the real problem of our govt deficits and spending. There are medical doctors who could have your whole patient history and all the results of your screening. They could have labored and study in the finest ins utions but many a times they have had misdiagnosis because of relying on their systems of thinking more than their God given reason.
If I had to bet money 100 times on a doctor's diagnosis versus your diagnosis, I would bet on the doctor every time. That is what makes him an expert.
You say that deficits don't matter, because we can always grow the economy fast enough to pay the increased interest payments.my point is you may be Dr. Economics but you totaly have misread your winded data and misdiagnosed the problem.
No, we can't. The debt has been growing at a rate many times that of the economy, AND SO HAVE THE INTEREST PAYMENTS.
THAT IS EXACTLY WHAT I HAVE BEEN SAYING.economic analysist have been saying that ... if we dont reduce the debt we will suffer later on.
When the economy expands but people are paid less, that is a bad thing.You on the other hand are saying something totally different. That we have a fake boom with no growth(when we dont. Look at the GdP), we have no increase in revenues(we do)>
Try to understand this, if you can:
Economic growth does not mean a greater standard of living.
I realize this is a very advanced concept, so let me repeat it a few times so you can understand it.
Economic growth does not mean a greater standard of living.
Economic growth does not mean a greater standard of living.
Economic growth does not mean a greater standard of living.
Economic growth does not mean a greater standard of living.
Economic growth does not mean a greater standard of living.
Economic growth does not mean a greater standard of living.
Economic growth does not mean a greater standard of living.
Economic growth does not mean a greater standard of living.
I will try something else that's really advanced, so please try to follow this:
The debt left over from the Reagan era is dragging the economy down, making this recovery much less strong than it should be.
The debt left over from the Reagan era is dragging the economy down, making this recovery much less strong than it should be.
The debt left over from the Reagan era is dragging the economy down, making this recovery much less strong than it should be.
The debt left over from the Reagan era is dragging the economy down, making this recovery much less strong than it should be.
The debt left over from the Reagan era is dragging the economy down, making this recovery much less strong than it should be.
Do you have it yet?
Has it sunk in?
There is much more than simple government debt at play here, but given your poor track record at understanding what you are reading, I am not even going to bother to go there.
historically it has been proven that the weathiest 10 percent will horde resources, and that the middle class is the engine for economic advancment. So i dont even agree with the premise that tax cuts cause economic gorwth, we didnt see a huge rise on the sock market when middle america got its $300 back did we? no.
BTW i mis-understood (actually i just quite reading after the first paragraph out of frustration with what i originally intepreted as.... well you know what i saw it as) so I am sorry for misundertanding random guy
'salright.
I actually don't think these tax cuts did much either. In general they do some good, but in this case whatever good they did was far outweighed by the long term damage to the economy of the debt interest payments.
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